Court Opinion

ID: 3173371
Source: CourtListenerOpinion
Date Created: 2016-01-29 15:03:21.534532+00
Date Added: 2024-06-11T12:01:37.737732
License: Public Domain

IN THE SUPREME COURT OF IOWA
                                No. 14–2095

                          Filed January 29, 2016

REGIONAL UTILITY SERVICE SYSTEMS,

      Appellee,

vs.

CITY OF MOUNT UNION, IOWA,

      Appellant.

      Appeal from the Iowa District Court for Henry County, John M.

Wright, Judge.

      A city appeals a district court order finding its bank account was

not exempt from execution under Iowa Code section 627.18 (2013).

REVERSED AND REMANDED.

      Steven E. Ort of Bell, Ort & Liechty, New London, for appellant.

      Lucas C. Helling and Vanessa M. Young of Foss, Kuiken &

Cochran, P.C., Fairfield, for appellee.
                                    2

WIGGINS, Justice.

      A judgment creditor garnished a city’s bank account when the city

failed to pay a judgment. The city moved to quash the garnishment on

the grounds the bank account was exempt from execution under Iowa

Code section 627.18 (2013). The court denied the motion and found the

bank account was not exempt. The city appeals. On appeal, we find the

bank account was exempt from execution.        Therefore, we reverse the

judgment of the district court and remand the case for further

proceedings consistent with this opinion.

      I. Background Facts and Proceedings.

      On June 18, 2014, the district court entered judgment for

$27,862.10 against the City of Mount Union in a breach of contract

action brought by the Regional Utility Service Systems Commission

(RUSS). The basis of that judgment is not at issue in this appeal. On

August 21, RUSS filed a praecipe directing the clerk of court to issue a

writ of general execution against the City. On August 25, the clerk of

court issued a writ of general execution commanding the county sheriff

to levy on all bank accounts held by the City at Iowa State Bank in

Mount Union. On September 1, the sheriff served the City with a notice

indicating RUSS had garnished its bank account in the amount of

$25,164.57.   On September 3, the City filed a motion to quash the

garnishment, claiming the garnished funds were exempt from execution

under Iowa Code section 627.18. The district court heard evidence on

the motion to quash and claim of exemption.

      At the hearing before the district court, Mayor John Marek testified

the garnished bank account was the only account the City had and

therefore contained both general funds and special funds, administration
                                          3

and expenditure of which is limited to specific purposes by law. 1 He also

testified at length about the means by which the City generates revenue

and limitations on how the revenue it generates may be spent.                      His

testimony established the City collects only $17,000 to $18,000 per year

in property tax revenues it may allocate as general funds. Although the

City collects additional property, sales, and road-use tax revenues, the

law requires the City to designate those funds as special funds. The City

spends its general funds on garbage collection, landfill operation,

building   maintenance,       vehicle    maintenance,       streetlight    operation,

elections, legal services, liability insurance, property insurance, fire and

police services, and compensation for the mayor, members of the city

council, a part-time clerk, a part-time maintenance person, and

contractors.    Consequently, Mayor Marek testified the City’s general

funds were necessary for the City to fulfill the purposes for which it was

incorporated and necessary for it to continue to pay its officials and

provide basic services not paid for with special funds.                 Additionally,

Mayor Marek indicated that approximately $23,000 of the $25,000 in the

bank account represented special funds and indicated the budget

submitted by the City in support of its motion to quash the garnishment

supported this conclusion.

      During the hearing, the district court instructed the parties to

submit briefs addressing what portion of the comingled funds in the

bank account were special funds. Relying on Mayor Marek’s testimony

      1Where  a special fund is created or set aside by statute for a particular
      purpose or use, it must be administered and expended in accordance
      with the statute, and may be applied only to the purpose for which it was
      created or set aside, and not diverted to any other purpose, or
      transferred from such authorized fund to any other fund.
Des Moines Metro. Area Solid Waste Agency v. Branstad, 504 N.W.2d 888, 890 (Iowa
1993) (quoting 81A C.J.S. States § 228 (1977)).
                                   4

and the budget submitted by the City, RUSS argued the account

contained $6550 in special funds.       The City argued the account

contained only $1392 in general funds and submitted a supporting

affidavit signed by Mayor Marek and an exhibit listing the sources of the

remaining special funds.

      The district court denied the motion to quash and the claim of

exemption. In its order denying the motion, the court acknowledged the

City depends on the money in its bank account to carry out the general

purposes for which the City was organized.       In addition, the court

acknowledged a prior case in which we held public property other than

buildings owned by a city to be exempt from execution. See City of Fort

Dodge v. Moore, 37 Iowa 388, 388–90 (1873). However, the court found

no caselaw directly supporting the argument that general funds held by a

municipality may constitute public property exempt from execution

under section 627.18. Thus, the court concluded the City stood in the

same position as any other judgment debtor with nonexempt funds in a

bank account and denied its motion to quash the garnishment of its

general funds. Because the court found RUSS’s argument with respect

to the balance of special funds in the account to be more persuasive, the

court found the garnished account contained only $6550 in special

funds.

      The City appeals the district court judgment denying its motion to

quash the garnishment.

      II. Issues.

      We must first decide whether the general funds in the City’s bank

account constitute “other public property” within the meaning of section

627.18. If they do, we then must decide whether the general funds in
                                      5

the City’s bank account were “necessary and proper for carrying out the

general purpose” for which the City was organized.

      III. Scope of Review.

      We review questions of statutory construction for correction of

errors at law.    Postell v. Am. Family Mut. Ins. Co., 823 N.W.2d 35, 41

(Iowa 2012).     A factual finding by the district court is binding on this

court if substantial evidence supports it. GE Money Bank v. Morales, 773

N.W.2d 533, 536 (Iowa 2009). Substantial evidence supports a factual

finding only if the fact finder may reasonably infer the finding from the

evidence presented. Vaughan v. Must, Inc., 542 N.W.2d 533, 538 (Iowa

1996).

      IV. Analysis and Discussion.

      In its motion to quash the garnishment, the City claimed the

general funds in its bank account were exempt from execution under the

Iowa Code. The Code provides:

      Public Property.
             Public buildings owned by the state, or any county,
      city, school district, or other municipal corporation, or any
      other public property which is necessary and proper for
      carrying out the general purpose for which such corporation
      is organized, are exempt from execution.

Iowa Code § 627.18.

      A.   Whether the General Funds in the City’s Bank Account

Constitute Other Public Property Within the Meaning of Section

627.18.    We begin our analysis by recounting basic principles of

statutory interpretation.    When we interpret a statute, our goal is to

determine legislative intent.     Auen v. Alcoholic Beverages Div., 679

N.W.2d 586, 590 (Iowa 2004). “We determine legislative intent from the

words chosen by the legislature, not what it should or might have said.”

Id. When the language in a statute is plain and unambiguous such that
                                      6

reasonable persons cannot disagree as to its meaning, we need not resort

to rules of statutory construction. Zimmer v. Vander Waal, 780 N.W.2d

730, 733 (Iowa 2010).         When statutory definitions bearing on the

meaning of the words in a statute exist, those definitions serve as the

foundation of our analysis.     Id.   When the language of a statute has

changed little over time, we look to its origins to discern legislative intent.

See Woodbury County v. City of Sioux City, 475 N.W.2d 203, 205 (Iowa

1991). Thus, when interpreting a statute originating in the early history

of our state, the common law informs our interpretation. See id.

      Finally, when interpreting a statute, we may not mitigate the

hardships either party presumes will flow from its enforcement, nor

impose our personal opinions as to its wisdom.         Kneppe v. Huismann,

223 Iowa 569, 571, 272 N.W. 602, 603 (1937).              Particularly in the

context of interpreting grants of powers and rights to public corporations,

doubt or ambiguity arising out of the terms the legislature used must be

resolved in favor of the public.       See Clark, Dodge & Co. v. City of

Davenport, 14 Iowa 494, 500 (1863).           As the Code instructs, it is

presumed the legislature intended the public interest to be favored over

any private interest in enacting a statute. See Iowa Code § 4.4(5).

      Iowa Code section 4.1 contains three statutory definitions bearing

on the meaning of the phrase “other public property” in section 627.18.

These definitions serve as the foundation of our analysis so long as they

are not “inconsistent with the manifest intent of the general assembly, or

repugnant to the context of the statute.” Iowa Code § 4.1. First, section

4.1(24) defines the term “property” to include both “personal and real

property.”   Id. § 4.1(24).   Second, section 4.1(21) defines the phrase

“personal property” to include “money, goods, chattels, evidences of debt,

and things in action.” Id. § 4.1(21). Third, section 4.1(13) defines the
                                     7

phrase “real property” to include “lands . . . and all rights thereto and

interests therein.” Id. § 4.1(13).

      Because the Code includes statutory definitions bearing directly on

the meaning of the phrase “other public property,” we construe the

phrase to accommodate these definitions in the absence of contrary

legislative intent.   See Groenendyk v. Fowler, 204 Iowa 598, 601, 215

N.W. 718, 720 (1927).         When interpreted in harmony with these

statutory definitions, the plain language of section 627.18 creates a

municipal right to exempt real property and personal property from

execution, including money held in a bank account. In other words, the

inclusion of the phrase “other public property” in section 627.18

indicates municipal corporations may claim as exempt from execution

virtually any property that is “necessary and proper for carrying out the

general purpose for which such corporation is organized.”      Iowa Code

§ 627.18.

      The legislative history of section 627.18 yields no evidence of

contrary legislative intent. On the contrary, legislative history supports

construing section 627.18 in harmony with the statutory definitions

contained in section 4.1. The statutory provision creating the exemption

from execution for public property now contained in section 627.18 first

appeared in the 1851 Code.       The language of the statutory exemption

from execution has changed little over time.     In fact, nearly identical

language to that contained in section 627.18 appeared the 1851 Code,

which provided in relevant part:

      Public property exempt. Public buildings owned by the
      state or any county, city, school district, or other civil
      corporation, and any other public property which is
      necessary and proper for carrying out the general purpose
      for which any such corporation is organized, are exempt
      from execution.
                                            8

Iowa Code § 1895 (1851). 2 The 1851 Code also included definitions of

the terms “property,” “personal property,” and “real property” identical to

those appearing in the modern Code. Compare Iowa Code § 26(8)–(10)

(1851), with Iowa Code § 4.1(13), (21), (24) (2013). 3

       Likewise, the common law offers no basis for disregarding the

relevant statutory definitions in interpreting section 627.18.                       See

Woodbury County, 475 N.W.2d at 205. For example, the first edition of

Black’s Law Dictionary acknowledged the term “property” as being “a

very wide term” that “includes every class of acquisitions which a man

can own or have an interest in.” Black’s Law Dictionary 953–54 (1st ed.

1891).    In fact, the notion that a person possesses an absolute and

fundamental right of private property consisting of “the free use,

enjoyment, and disposal of all his acquisitions” has been a foundational

premise of the common law since at least the time of Blackstone. See

Kerry v. Din, 576 U.S. ___, ___, 135 S. Ct. 2128, 2133, 192 L. Ed. 2d 183,

188 (2015) (quoting 1 William Blackstone, Commentaries on the Laws of

England 134 (1769)).

       We have never addressed the question of whether general funds in

a municipal bank account may constitute public property for purposes of

the exemption from execution contained in section 627.18.                     However,

nothing in our caselaw suggests the phrase “other public property”

excludes bank accounts containing general funds. We have previously

construed the phrase “other public property” to encompass personal

       2Section   1895 of the 1851 Code contained an additional sentence, which
provided that “property of a private citizen can in no case be levied upon to pay the debt
of a civil corporation.” Iowa Code § 1895 (1851). The legislature removed the bulk of
this sentence from the Code in 1981. See 1981 Iowa Acts ch. 182, § 4 (codified at Iowa
Code § 627.18 (1983)).
       3Neither the exemption from execution for public property nor these definitions
appeared in the Revised Statutes of the Territory of Iowa (1843).
                                     9

property. See Moore, 37 Iowa 388–90 (holding lumber, tools, and other

chattels owned by a municipal corporation were exempt from execution

under Iowa Code section 3274, now section 627.18).          In addition, we

have long acknowledged the breadth of the term “property.”

      The term “property” is said to be nomen generalissimum and
      to include everything which is the subject of ownership,
      corporeal or incorporeal, tangible or intangible, visible or
      invisible, real or personal; everything that has an
      exchangeable value, or which goes to make up one’s wealth
      or estate.

Wapsie Power & Light Co. v. City of Tipton, 197 Iowa 996, 1000, 193 N.W.

643, 645 (1923); see also Reynolds v. Miller, 6 Iowa 459, 461 (1858)

(explaining the term “property” as defined in Iowa Code section 26(10),

now section 4.1(24), encompasses “every interest a man may have in any

property, real or personal” such that it is “equivalent to the word ‘estate,’

as used in relation to wills”).

      Consequently, we conclude the general funds in a municipal bank

account constitute “other public property” exempt from execution under

Iowa Code section 627.18 so long as they are necessary and proper for

carrying out the general purpose for which the municipality is organized.

This conclusion accords not only with the statutory definitions in the

Code and the common law existing when the general assembly enacted

the statutory exemption from execution for public property, but also with

our caselaw and the scope of the exemption from execution for public

property in other jurisdictions. See P.H.V., Annotation, Municipal Funds

and Credits as Subject to Levy Under Execution or Garnishment on

Judgment Against Municipality, 89 A.L.R. 863, 864 (1934) (“The courts

are practically unanimous in holding that the funds or credits of a

municipality or other public body exercising governmental functions,

acquired by it in its governmental capacity, may not be reached by its
                                   10

creditors by execution under a judgment against the municipality, or by

garnishment served upon the debtor or depository of the municipality.”).

      B.    Whether the General Funds in the City’s Bank Account

Were Necessary and Proper for Carrying Out the General Purpose for

Which the City Was Organized. RUSS argues the general funds were

not necessary and proper for carrying out the general purpose for which

the City was organized, urging the City presented no evidence it has been

unable to fulfill the purposes for which it was incorporated since its

general funds were garnished. The City argues RUSS failed to preserve

this issue on appeal by failing to cross-appeal from an adverse ruling by

the district court.

      Ordinarily a successful party need not cross-appeal on a ground

presented to but ignored or rejected by the district court to preserve

error. EnviroGas, L.P. v. Cedar Rapids/Linn Cty. Solid Waste Agency, 641

N.W.2d 776, 781 (Iowa 2002) (quoting Johnson Equip. Corp. of Iowa v.

Indus. Indem., 489 N.W.2d 13, 16 (Iowa 1992)).      But this general rule

applies only when the party received a favorable ruling on the claim at

issue. See Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 398–99 (Iowa

2001); Ritz v. Wapello Cty. Bd. of Sup’rs, 595 N.W.2d 786, 789 (Iowa

1999); Venard v. Winter, 524 N.W.2d 163, 165 (Iowa 1994).         “This is

because a party need not, in fact cannot, appeal from a favorable ruling.”

Garling Const., Inc. v. City of Shellsburg, 641 N.W.2d 522, 523 (Iowa

2002) (quoting Johnson Equip., 489 N.W.2d at 16). Our determination as

to whether RUSS preserved the argument that the general funds were

not necessary and proper for carrying out the general purpose for which

the City was organized turns on whether RUSS received an adverse

ruling from the district court on this issue from which it could have

appealed.
                                    11

      The sole issue before the district court was whether the City was

entitled to the statutory exemption from execution from public property,

and RUSS received a favorable ruling denying the claim of statutory

exemption.    Although the district court made an adverse finding in

arriving at that ruling, RUSS could not appeal the ruling in its favor.

Thus, RUSS preserved its argument that the general funds were not

necessary to the general purpose for which the City was organized as

there was no adverse ruling from which it could have appealed.

      The district court found the City depends on the general funds in

its bank account to carry out the general purposes for which the City

was organized.   This finding is binding on appellate review so long as

substantial evidence actually presented to the district court supports it.

See Morales, 773 N.W.2d at 536.       Of course, in determining whether

substantial evidence supports a district court finding, we do not weigh

the evidence. See Allison-Kesley Ag Ctr., Inc. v. Hildebrand, 485 N.W.2d

841, 844 (Iowa 1992). Rather, “we only decide if there is a proper basis

upon which the trial court could find as it did.” Id. (quoting Arbie Mineral

Feed Co. v. Nissen, 179 N.W.2d 593, 595 (Iowa 1970))

      We have never specified a legal test for determining whether

property is “necessary and proper for carrying out the general purpose

for which such corporation is organized” in evaluating claims of

exemption brought under section 627.18. Nor does either party advance

a specific legal test for determining whether public property meets this

prerequisite of the statutory exemption from execution.       However, we

long ago concluded a recitation of statutory language is sufficient to state

a claim of statutory exemption from execution. Moore, 37 Iowa at 390.

      The City presented ample evidence from which the district court

could have reasonably inferred the general funds in its bank account
                                     12

were necessary to the general purposes for which the City was organized.

Mayor Marek testified the general funds were necessary for the City to

fulfill the purposes for which it was incorporated because without them

the City would unable to pay its officials or provide basic services it could

not pay for with special funds. In addition, the City submitted various

documents to support its allegation that the general funds were

necessary and proper to carrying out the general purposes for which it

was organized, including a copy of its budget for the present fiscal year

along with schedules summarizing its recent historical revenues and

expenditures.   Consequently, we conclude the district court based its

finding on substantial evidence.

      Because the determination of whether a finding is supported by

substantial evidence requires us to consider the evidence actually

presented to the district court, it is irrelevant that the City presented no

evidence on appeal suggesting it was unable to fulfill the purposes for

which it was incorporated after its general funds were garnished.

Moreover, although RUSS cross-examined Mayor Marek at the hearing

on the motion to quash, RUSS produced no other evidence tending to

undermine the conclusion that the general funds were necessary and

proper to carrying out the general purposes for which the City was

organized.

      In its order denying the motion to quash the execution, the district

court found the special funds are dedicated to the purposes set forth by

the government entities that provide them whereas the use of general

funds is unrestricted. However, the court made no explicit finding that

the general funds were proper to carrying out the general purposes for

which the City was organized.      Thus, we must determine whether the

funds were proper for that purpose.
                                     13

      The meaning of the word “proper” may depend on context.            See

Lockhart v. Cedar Rapids Cmty. Sch. Dist., 577 N.W.2d 845, 847 (Iowa

1998). For example, property may be “proper” for carrying out a specific

purpose in the sense that it is “suitable, right, fit, or correct” to use the

property in carrying out that purpose.      Black’s Law Dictionary, 1410

(10th ed. 2014). Alternatively, property may be “proper” for carrying out

a specific purpose in the sense it is “allowable, right, and becoming” to

use the property for such purposes. Id.

      We need not parse the shades of meaning between competing

definitions of the term “proper” to resolve the question before us,

however. We conclude that regardless of the precise meaning of the term

“proper,” it is obvious the general funds were proper to carrying out the

general purpose for which the City was organized. Notably, neither party

disputed the propriety of using such funds for carrying out that purpose

or the propriety of the means by which the City collected the funds.

More importantly, at the hearing on the motion to quash the execution,

Mayor Marek testified use of the general funds was unrestricted by law

and indicated the general funds derived from property taxes assessed at

a rate allowed by law.

      Therefore, we conclude the general funds qualified as exempt from

execution under Iowa Code section 627.18.

      V. Disposition

      We reverse the judgment of the district court denying the City’s

motion to quash the garnishment and remand the case to the district

court for further proceedings consistent with this opinion.

      REVERSED AND REMANDED.