Court Opinion

ID: 9916849
Source: CourtListenerOpinion
Date Created: 2024-01-10 18:06:00.818765+00
Date Added: 2024-06-11T13:26:02.609800
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                     No. 23-0260
                               Filed January 10, 2024

DENNIS A. BINNEBOESE, STEPHEN P. BINNEBOESE, LYNN M. MORGAN,
MARK J. BINNEBOESE, LISA S. LOVEJOY, and TERRIE R. BINNEBOESE,
     Plaintiffs-Appellants,

vs.

JAMES D. BINNEBOESE,
     Defendant-Appellee.
________________________________

JAMES D. BINNEBOESE,
    Third-Party Plaintiff,

vs.

BINNEBOESE FAMILY FARMS PARTNERSHIP,
     Third-Party Defendant.
________________________________________________________________

       Appeal from the Iowa District Court for Plymouth County, Patrick H. Tott,

Judge.

       Siblings appeal rulings in litigation over their brother’s exercise of an option

to purchase farmland in their mother’s will. AFFIRMED AND REMANDED WITH

DIRECTIONS.

       David C. Briese of Crary, Huff, Ringgenberg, Hartnett & Storm, P.C., Sioux

City, for appellants.

       Angie J. Schneiderman of Moore, Corbett, Moeller & Meis, L.L.P., Sioux

City, for appellee.

       Heard by Bower, C.J., and Tabor and Chicchelly, JJ.
                                         2

TABOR, Judge.

       This case is about two things: skyrocketing land values and the intent of

testators Eugene and Mildred Binneboese that their son James have the chance

to continue farming the family’s nearly 400 acres in Plymouth County. Their wills

devised the real estate to their six children and included an option for James to

purchase the farmland at fair market value. He exercised that option in July 2020.

But when James and his five siblings couldn’t agree on the fair market value, the

siblings filed an action for declaratory judgment. The court denied the siblings’

second and third motions to amend their petition. It then granted partial summary

judgment for James, invoking the doctrine of equitable conversion and determining

the fair market value at the date he exercised his option. The court also credited

the rent that James paid during the litigation toward the purchase price, calculated

the interest that accrued, and ordered the siblings and their spouses to convey

marketable title.

       The siblings now appeal, arguing the court improperly (1) denied their

motions to amend, (2) applied the equitable-conversion doctrine, and (3) credited

the rent, calculated interest, and conveyed marketable title that included their

spouses. Finding no abuse of discretion, we affirm the orders denying the motions

to amend. Finding the court properly relied on equitable conversion, we affirm the

partial summary judgment for James. And because the court’s treatment of the

rent and interest was proper, we affirm those rulings. But because the district court

ordered the siblings and their spouses—who were not joined as parties to the

action—to convey marketable title, we remand with instructions for the district court

to address that issue.
                                          3

I.     Facts and Prior Proceedings

       James has been farming the family’s land for more than four decades.

Meanwhile, his three brothers—Dennis, Stephen, and Mark Binneboese—and his

two sisters—Lynn Morgan and Lisa Lovejoy—pursued careers off the farm.1 In

nearly identical wills, their parents, Eugene and Mildred, conveyed the land to their

six children. The parents also granted James an option to purchase the real estate

at fair market value no later than five years after the death of the last surviving

parent. Eugene died in 1998; Mildred died in 2016. Mildred’s will states:2

              SECOND
              I give all of my real estate to my children Dennis A.
       Binneboese, Stephen P. Binneboese, Lynn M. Morgan, Mark J.
       Binneboese, Lisa S. Lovejoy and James D. Binneboese, equally, per
       stirpes, subject to a life estate which I give to my husband A. Eugene
       Binneboese, and subject to the options in clause THIRD of this will.
              THIRD
              Upon the death of my husband A. Eugene Binneboese or if A.
       Eugene Binneboese does not survive me, I give to my son
       James D. Binneboese the option to purchase at fair market
       value any of my farm real estate, said option to be exercised in
       writing within five (5) years from the date of death of my
       husband or if my husband does not survive me within five (5)
       years from my death. If the option is exercised the purchase may
       be made upon the following terms:
              Down payment of 20% of the purchase price, and the balance
       to be paid in accordance with a five (5) year real estate contract
       providing for annual principal payments of 3% of the balance
       following the down payment, plus interest payments at the rate set
       for the last sale of five (5) year U.S. Treasury Notes prior to the
       date of the contract, and the interest rate shall remain fixed and
       not changed for the term of the contract. All balances, principal,
       and interest, shall be due and payable five (5) years from the date of
       possession as stated in the contract.[3]

1 For clarity and efficiency, we will refer to anyone with the last name Binneboese

by their first name. We will refer to the appellants as “the siblings.”
2 We have bolded the key parts of the will excerpt.
3 The will describes the land as three parcels in Plymouth County.
                                          4

       Since Mildred’s death, the farm has been deeded to the siblings. James

leased the property from the Binneboese Family Farms Partnership starting in

March 2017.4 He paid $250 per acre in rent. In July 2020, James sent a letter to

his siblings exercising his option to buy. The letter, signed by his attorney, stated:

                      You and each of you are hereby given notice that
       James D. Binneboese does hereby exercise the option granted to
       him in the Last Will and Testament of [his parents] to purchase the
       real estate in Plymouth County, Iowa . . . .
                      ....
                      I would request that you contact me to discuss how we
       should proceed to determine the fair market value of these
       properties.

       To determine that fair market value, in December 2020, the siblings

obtained an appraisal setting the property’s value at $4,594,590 (an average of

$11,486.48 per acre) from auctioneer Bruce Brock and provided it to James.

James then offered $9,200 per acre. The siblings countered with $10,600 per

acre, and James raised his offer to $9,550 per acre. In March 2021, counsel for

James sent a letter to the siblings noting that “efforts to agree upon terms of his

option to purchase the farm which was owned by your parents have not

succeeded.” The attorney suggested either litigation or mediation to determine the

fair market value.

       In April 2021, the siblings obtained an appraisal from Daniel Comes of

Midwestern Land and Auction. Comes believed the Binneboese farm was then

worth $4,959,200 (an average of $12,435 per acre).5 But James rejected that

4  The court determined in its final order that the Binneboese Family Farms
Partnership “holds no title interest to the real estate.”
5 Comes testified that “farmland values have increased significantly since 2020”—

in some cases by thirty to forty percent.
                                          5

valuation, contending that fair market value should be assessed as of July 2020

when he exercised the option to purchase.

       The siblings and James never agreed upon the fair market value.6 So the

siblings petitioned the district court for declaratory judgment in August 2021. They

asserted that the parties were “ready, willing, and able to enter a purchase

contract” for the farm real estate and wanted the court to declare “the rights, status,

and other legal relations of [the siblings] and [James].” They asked the court to (1)

declare that James had exercised his option to purchase the farm, (2) determine

the real estate’s fair market value and the contract terms, and (3) require James

to specifically perform under those terms as determined by the court.

       Early on, the siblings moved to amend their petition, adding Stephen’s wife,

Terrie, as a plaintiff.7 The court granted it. A few months later, the siblings moved

to amend again. The second amended petition asked the court to declare that the

provision in their mother’s will concerning the purchase price at fair market value

was “indefinite, uncertain, and incomplete.” The siblings also moved to include a

count pled in the alternative seeking a declaratory ruling that James’s “inequitable

conduct and unnecessary delay has caused [him] to be unjustly enriched and thus,

[his] exercise of his purported option is unenforceable.” The siblings added that if

the court denied the first two requests, it should determine fair market value as of

the date of the real estate contract. The court denied the siblings’ second motion

6 As land prices continued to rise, in November 2021, the siblings obtained a

broker’s opinion from Midwestern Land & Auction that the fair market value of the
farm real estate was $6,513,000. To counter that amount, James obtained a report
from Uniform Rural Appraisal Report in January 2022, setting fair market value of
the farm at $3,855,200 (an average of $9,693.70 per acre) effective July 2020.
7 Stephen deeded half of his interest in the farmland to Terrie in 2018.
                                         6

to amend because counts one and two were “diametrically opposed” to the original

petition and count three was pleaded in the alternative, contradicting the original

claims. Further, significant discovery would be needed with five weeks left in the

case and would significantly prejudice James. The siblings filed a third request to

amend, but the court found it was almost identical to their second request and

denied it for the same reasons.

       The siblings and James both moved for partial summary judgment. The

court denied the siblings’ motion and granted James’s cross motion. The court

applied the doctrine of equitable conversion in deciding that fair market value

should be determined as of July 2020.8 The court ruled that James should receive

credit for the $93,625 in rent he paid in 2021 and the $46,812.50 paid in 2022.

After calculating the interest due, the court set the purchase price at $4,089,179.37

as of January 30, 2023. The court ordered that the warranty deed should be issued

to James from the siblings and their spouses.

       The siblings appeal.

II.    Scope and Standards of Review

       We will reverse the district court’s denial of the siblings’ motions to amend

their petition only if they show “a clear abuse of discretion.” Daniels v. Holtz, 794

N.W.2d 813, 817 (Iowa 2010). An abuse occurs when the court “exercises its

discretion ‘on grounds clearly untenable, or to an extent, clearly unreasonable.’”

In re Est. of Roethler, 801 N.W.2d 833, 837 (Iowa 2011) (citation omitted).

8 The court found that the Comes appraisal of $4,594,590 was too high, but the

Uniform Rural Appraisal Report appraisal of $3,855,200 was a “bit too low” and
set the actual fair market value as of July 31, 2020, at $4,153,400.
                                           7

         We review declaratory judgments according to the nature of the underlying

action. Cent. Bank & Real Est. Owned, L.L.C. v. Hogan, 891 N.W.2d 197, 199

(Iowa 2017) (reviewing summary judgment granted in declaratory action for

corrections of legal error). When equitable doctrines are involved, as here, our

review is de novo. Passehl Est. v. Passehl, 712 N.W.2d 408, 414 (Iowa 2006). In

a de novo review, we give weight to the district court’s factual findings, but we are

not bound by them. Roethler, 801 N.W.2d at 837.

III.     Analysis

       A. Denying Petitions to Amend

         The siblings contend that the court erred in denying their second and third

motions to amend their petition.9 In considering the second amendment, the court

described the original petition as “asking what the price should be” and what was

the effective date of the valuation. In contrast, the amended petition was “looking

for a ruling saying, well, there is no right to buy so the purchase price and the timing

is immaterial.” The court asked: “How does that not diametrically switch the issues

by 180 degrees?”           Counsel for the siblings responded that they were just

“interpreting the will.”

         In denying the amendments, the court found that the first two claims in the

new complaint were “diametrically opposed” to the position the siblings took in their

9  James contends the siblings waived error on their motions to amend by
proceeding with their motion for partial summary judgment. We disagree. The
siblings moved to amend and received rulings from the district court. Those steps
were enough to preserve error. See Lamasters v. State, 821 N.W.2d 856, 864
(Iowa 2012) (“This is not one of those cases where the court failed to mention the
issue.”).
                                         8

original petition. The court also found that a “discovery window” of five weeks was

too narrow for James to prepare under the proposed amendments.

      Motions to amend are governed by Iowa Rule of Civil Procedure 1.402(4):

             A party may amend a pleading once as a matter of course at
      any time before a responsive pleading is served . . . . Otherwise, a
      party may amend a pleading only by leave of court or by written
      consent of the adverse party. Leave to amend, including leave to
      amend to conform to the proof, shall be freely given when justice so
      requires.

      Since the siblings did not have James’s consent to amend their petition,

their only path forward was to seek leave from the court. The siblings emphasize

that “amendments are the rule and denials are the exception.” See Bremicker v.

MCI Telecomms. Corp., 420 N.W.2d 427, 429 (Iowa 1988).                 While true,

amendments “should not be allowed after a responsive pleading has been filed, if

the pleading substantially changes the issues” for trial, especially if those issues

unfairly prejudice the defendant. Id.

      We find the court’s denial reasonable here.         For one, the proposed

amendments substantially transformed the issues for trial. In the original petition,

the siblings requested specific performance of the purchase option. The only

question was how to compute fair market value. But just over one month before

trial, the siblings suggested that the purchase option was unenforceable and the

will provisions were invalid. The sibling’s new positions would force James to re-

strategize his case. Thus, these proposed amendments put James at a severe

disadvantage. See Stewart v. Iowa Mach. & Supply Co., No. 08–0411, 2009 WL

1708838, at *4 (Iowa Ct. App. June 17, 2009) (finding no abuse of discretion
                                          9

considering discovery faced by defendants if the amendment were granted). Thus,

we affirm the district court’s orders denying the amendments.

   B. Applying Doctrine of Equitable Conversion

       We move next to the siblings’ claim that the court erred in granting partial

summary judgment for James through the doctrine of equitable conversion.10 The

siblings argue that “there was no positive direction to sell, no absolute necessity to

sell, or a blending of realty and personalty by the testators in the Wills.” They

contend that “[i]n this case, Eugene and Mildred did not enter into any contract to

sell real estate prior to their death.” And that “[e]quitable conversion is simply not

applicable here because there is no contract” as “[t]he terms of the potential sale

to James are too indefinite and uncertain to form a valid contract.”11

       We disagree with the siblings’ contention. Their original petition conceded

James had a valid option to purchase under their parents’ wills. The court’s only

duty was to designate the date for deciding fair market value.           The siblings

       10               What is an equitable conversion? . . . [It] is defined as
       a constructive alteration in the nature of property by which in equity
       real estate is regarded as personalty or personal estate as realty. It
       grows out of the old equitable maxim that “equity regards that done
       which ought to be done.”
In re Est. of Schwertley, 293 N.W. 445, 447 (Iowa 1940) (internal quotation marks
and citation omitted); see also Equitable Conversion, Black’s Law Dictionary (11th
ed. 2019). And “nothing is better established than the equitable principle that land
directed to be sold and turned into money is to be considered as that species of
property into which it is directed to be converted and this is especially so where
the direction is made in a will.” In re Est. of Jackson, 252 N.W. 775, 777 (Iowa
1934).
11 The district court invoked equitable conversion and assumed both parties agreed

there was a valid option to purchase but just couldn’t agree on when fair market
value should be determined. Yet the siblings’ contention on appeal that there was
no contract revisits their failed motion to amend. But because James does not
challenge error preservation here, we opt to address this argument.
                                          10

maintained that it would be the date of the eventual real estate contract. James

argued that under the doctrine of equitable conversion, the date was when he

exercised his option. The court determined that the date for determining fair

market value was July 31, 2020—when James’s exercise of his purchase option

worked an equitable conversion of the real estate to personalty for the siblings.

       The district court stated: “Case law is clear that under the doctrine of

equitable conversion the nature of the right in the real estate in the seller converts

from realty to personalty as of the date of the happening of the condition

established to trigger the sale of the real estate.” We agree. See generally

Holzhauser v. Iowa State Tax Comm’n, 62 N.W.2d 229, 233 (Iowa 1953)

(explaining that a will may direct land to be sold and the beneficiaries’ interest is

then turned into money). The “real purpose” of the equitable-conversion doctrine

“is to give effect to the manifest intent of a testator.” See Ingraham v. Chandler,

161 N.W. 434, 435 (Iowa 1917). The manifest intent of Eugene and Mildred was

to give their son James, who farmed with them, the chance to buy the land from

his siblings at a fair price after their parents were gone. Like the district court, we

find the will created an enforceable option for James to buy the real estate at fair

market value.

       And like the district court, we believe the fair market value should be

determined at the time James exercised the option to purchase. “It is only when

the optionee binds himself to buy that the equitable conversion takes place.” Id.

James bound himself to purchase the real estate in July 2020, when he sent notice

to his siblings. Applying the equitable-conversion doctrine here carried out the
                                          11

intent of the testators and did not circumvent public policy.12 See Construx of Ill.,

Inc. v. Kaiserman, 800 N.E.2d 1267, 1275 (Ill. App. Ct. 2003). We thus affirm the

grant of partial summary judgment to James.

   C. Crediting Rent Payments and Calculating Interest

       Having upheld the grant of partial summary judgment to James, we turn to

the siblings’ complaints about deducting the rent James paid in 2021 and 2022

from the purchase price and the court’s calculation of interest.

   1. Rent

       The siblings argue that the district court erred in crediting James for his rent

payments because “this relief was outside the scope of the pleadings.” They insist

that James did not provide notice of his intent to claim this offset.

       In response, James asserts that the siblings should not be surprised that

his rent payments would be credited toward the purchase price. He recalls that

counsel for the siblings argued in March 2022 that James’s act of paying rent

showed he wasn’t the equitable owner of the real estate.            James’s attorney

responded that his client was “between a rock and hard place” and continued to

12 In fact, James asserts that applying the doctrine in situations like this is “good

public policy.” In his view, not only was it “in accord with the language and intent
of the wills,” but it ensured that the parents’ desire to equitably divide their estate
among their six children could be accomplished. He reasoned:
       Farmland values can fluctuate greatly within a five-year period. Had
       the purchase price been tied to a date of death, there would be the
       risk that some children would not receive the benefit of inflating real
       estate values. Alternatively, if real estate values depreciated over
       time, the purchase price would have been inequitably inflated.
       Furthermore, by fixing the fair market value to a date certain, any
       motivation to manipulate the sale date after an option is exercised
       should be eliminated.
We agree with his reasoning.
                                          12

pay rent so the siblings did not pursue a forcible entry and detainer action. On

appeal, James contends the siblings knew the equitable-conversion doctrine could

apply and that giving him credit for the rent payments fell within the parties’

requests for general relief. We agree with James.

       “[P]rayers for general relief are to be construed liberally.” City of Okoboji v.

Parks, 830 N.W.2d 300, 309 (Iowa 2013). “Under a prayer for general relief, a

court may grant relief ‘consistent with the pleadings and the evidence.’” Id. (citation

omitted). But any relief granted must not surprise the other side. Jorge Constr.

Co. v. Weigel Excavating & Grading Co., 343 N.W.2d 439, 442 (Iowa 1984). The

siblings asked the court to determine the terms of the purchase contract. This

general request would include the rent offset. The siblings tried to use the rent

payments to their tactical advantage. Losing that argument, they should have

predicted that the payments would be part of the court’s calculus in granting

equitable relief. It would make no sense for a court sitting in equity to deny James

credit for rent he paid after the court decided that he was the equitable owner as

of July 2020. Thus, we affirm the deduction of rent he paid for 2021 and 2022 from

the purchase price.

   2. Interest

       The siblings also dispute the district court’s calculation of interest. They

contend the court “ignored the express language” of the will and, instead,

substituted its own terms as to what interest rate applied. The will states that

purchase terms include a down payment of twenty percent, the balance to be paid

“in accordance with a five-year real estate contract providing for annual principal

payments of three percent of the balance following the down payment, plus interest
                                            13

payments at the rate set for the last sale of five (5) year U.S. Treasury Notes prior

to the date of the contract.” (Emphasis added.) The district court declared: “The

terms of the option gave [James] the option to finance the purchase over five years

at the 5-year US Treasury Rate as of the date of the exercise of the option.” The

siblings argue that the appropriate interest rate cannot be determined yet because

“there is still no real estate contract.”

       James rebuffs the siblings’ assumption that there must be a separate real

estate contract. He urges that requiring the parties to execute another contract

beyond his exercise of the purchase option would be adding terms to the will.

       To settle the debate over the will language, we follow three rules. We look

first to the testator’s intent, which “is the polestar and must prevail.” In re Est. of

Kruse, 250 N.W.2d 432, 433 (Iowa 1977) (citation omitted). Second, “the intent

must be gathered from a consideration of all the language of the will, the scheme

of distribution, and the facts and circumstances surrounding the making of the will.”

Id. (citation omitted). Third, we resort to “technical rules of construction” only if the

language of the will is ambiguous or conflicting or the testator’s intent is uncertain.

Id. (citation omitted).

       Granted, Mildred’s will does mention a “real estate contract.” But only to

say that the balance must be paid “in accordance” with such a five-year contract

after James exercises the purchase option.            Read as a whole, the will is

unambiguous. Mildred wanted to distribute her estate equally to all six children.

And the terms governing James’s purchase of the real estate are specific and

clear. The siblings try to reargue their disfavor with equitable conversion, stating

that there was no contract, thus, the interest should have been calculated as of a
                                           14

later date. But since we have decided that James’s exercise of the option worked

an equitable conversion of the real estate as of July 2020, and fair market value

was based on that date, the district court properly calculated the interest.

       D.     Marketable Title

       Lastly, the siblings argue that since their spouses are not named parties in

the action and were never served notice, the district court lacked jurisdiction over

them. According to the siblings, the court’s declaration is void “to the extent it

requires signing of the warranty deed by the Spouses.” The siblings urge “the case

should be remanded to determine the rights of the Spouses.”

       James acknowledges that the siblings raise a valid point on the court’s

jurisdiction over the spouses. But he invites our court to resolve the issue on

appeal by instructing the district court to revise its order so that the siblings “simply”

convey marketable title. We decline that invitation. Rather, we remand with

instructions for the district court to address the issue of marketable title.

       AFFIRMED AND REMANDED WITH DIRECTIONS.