Court Opinion

ID: 4249721
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:20:42.046046+00
Date Added: 2024-06-11T14:44:16.226724
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 08–1729

                        Filed December 30, 2010

CURT DANIELS,

      Appellant,
vs.

JOHN HOLTZ; WSH PROPERTIES LLC;
NAVAJO ASSOCIATES, LLC,
JOHN DOES and JANE ROES 1–5,

      Appellees,

JAMES NERVIG and BRICK, GENTRY,
BOWERS, SWARTZ, STOLTZE and
LEVIS, P.C.;

      Appellees,

HUNTERS RETREAT, LLC,

      Appellee.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Lucas County, Carla T.

Schemmel, Judge.

      Plaintiff appeals district court grant of summary judgment and

argues sheriff’s sale should be set aside for grossly inadequate price and

unfair conduct.    DECISION OF COURT OF APPEALS VACATED;

DISTRICT COURT JUDGMENT AFFIRMED IN PART AND REVERSED

IN PART; CASE REMANDED.
                                    2

      Curt N. Daniels, pro se, Chariton, for appellant.

      Billy J. Mallory of Brick Gentry P.C., West Des Moines, for

appellees John Holtz, WSH Properties, LLC, and Hunters Retreat, LLC.

      Kermit B. Anderson of Finley, Alt, Smith, Scharnberg, Craig,

Hilmes & Gaffney, P.C., Des Moines, for appellees Nervig and Brick,

Gentry, Bowers, Swartz, Stoltze and Levis, P.C. (Brick Law Firm).
                                          3

STREIT, Justice.

       “Won’t you be my neighbor?”1             Curt Daniels, the owner of a

corporation sold at a sheriff’s sale, seeks to have the sale set aside

because, he argues, it lacked a just appraisal, the appraisers were not

“disinterested householders of the neighborhood,” and the property sold

for a grossly inadequate price.         Iowa Code § 626.93 (2005).          Daniels

argues it is improper to adjust the appraisal of a corporation to take

account of capital gains tax liability. Daniels also argues the sale should

be set aside because it was unfairly or fraudulently conducted.                  The
district court granted summary judgment in favor of defendants.                   We

reverse the district court in part and hold Daniels raised a genuine issue

of material fact regarding alleged inappropriate behavior at the auction

that may have affected the selling price. In all other respects, we affirm

the district court, including the propriety of discounting the value of the

corporation in view of capital gains tax liability on the corporation’s

major asset.

       I. Background Facts and Prior Proceedings.

       This case arises from long-brewing hostility between Curt Daniels

and John Holtz. Holtz operates two Arizona limited liability companies,

WSH Properties, LLC and Hunters Retreat, LLC.                  Daniels previously

operated two hog lots, one in Jasper County and one in Lucas County.

Both properties were owned by an Iowa corporation owned and controlled

by Daniels called Indian Creek Corporation (ICC).                  In 1998, WSH

Properties and John Holtz purchased the Jasper County property out of

a tax-sale auction after ICC failed to pay the property taxes on the Jasper

County property. After the sale, Daniels removed certain items from the

       1Fred Rogers sang the song “Won’t You Be My Neighbor” at the beginning of his
popular children’s show: Mister Rogers’ Neighborhood.
                                           4

Jasper County property. WSH Properties brought a replevin suit against

ICC and Daniels regarding the removed property, won a jury verdict

finding it was entitled to possession of the disputed property, and was

awarded $246,000 in damages.2 In 2001, the State of Iowa obtained a

judgment of $95,000 against Daniels and ICC based on waste-control

violations at the Jasper County property.

       In 2006, the state assigned the $95,000 judgment to Hunters

Retreat LLC, another company owned by Holtz, in exchange for a cash

payment of $95,000.          In order to execute on the judgment, Hunters
Retreat filed a praecipe for issuance of a writ of general execution on the

judgment seeking the sale of the “right, title, and interest of Curt Daniels

individually and as owner in Indian Creek Corporation, including but not

limited to any certificated or uncertificated stock ownership, corporate

books and records regarding said Indian Creek Corporation.” The Lucas

County Sheriff published and served notice of a sheriff’s sale, setting the

date for a public sale of ICC.

       Pursuant to Iowa Code section 626.93, three appraisals of ICC

were provided to the Lucas County Sheriff. ICC’s main asset is a parcel

of real estate consisting of farmland in Lucas County, Iowa.                        P.A.

Henrichsen, an attorney and certified public accountant (CPA) with an

office in West Des Moines, was selected by Hunters Retreat and provided

an appraisal of ICC stock at $52,000. Henrichsen based his appraisal on

2005 bankruptcy schedules filed under oath for ICC by Daniels, which

estimated the value of ICC at $104,000 ($952,000 in assets less

       2On    appeal, the court of appeals vacated the jury verdict and remanded for a
new trial because it found the jury had acted based on passion and anger. On further
review, this court reinstated the jury verdict because there was an evidentiary basis for
the verdict, but agreed the amount of damages should remain at the $246,000 set by
the district court. WSH Props., L.L.C. v. Daniels, 761 N.W.2d 45, 51–52 (Iowa 2008).
                                    5

$849,000 in liabilities).   Henrichsen then adjusted the bankruptcy

schedule to increase the value attributed to the land by $150 per acre,

decrease the value for assets no longer in ICC’s possession, decrease the

value to account for a mortgage balance that was higher than reflected in

the bankruptcy filing, and decrease the value based on the $246,000

WSH judgment.     Leland Shelton, a licensed real estate agent with an

office in Chariton, Iowa, was selected by Daniels and appraised the value

of the ICC stock at $769,000.     Shelton determined the only valuable

asset of the corporation was 1219 acres of real estate that he valued at
$1,643,821. He then discounted that amount based on two mortgages—

one with a remaining balance of $319,617.53 and one with an original

principal of $127,685.31—and the $246,000 WSH judgment.

      Based on the disagreement between Henrichsen and Shelton,

Wendy Sims, a CPA with offices in Des Moines and Pella, was selected by

the Lucas County Sheriff to provide a third appraisal. Sims appraised

the value of the ICC stock at $29,500. Sims’s written appraisal valued

1225 acres of farmland at $1,592,500.       Sims then subtracted known

liabilities of ICC: an outstanding mortgage of $330,481.95, another

outstanding mortgage of $175,000, the WSH judgment of $246,000, and

$20,000 in estimated court costs for a pending appeal. This brought the

property appraisal down to $821,018.05. Sims then applied a twenty-

five percent reduction to the $821,018.05 based on an assessment of

unknown liabilities that might exist within the corporation because Sims

was unable to review any corporate books or records. Sims then noted a

large potential tax liability that would occur on the sale of the property.

ICC originally paid $420,000 for the property and Sims estimated the
property was now worth $1,592,500. The increase in value is a taxable

gain of $1,172,500, which would result in an estimated capital gains tax
                                        6

liability of $586,250 upon sale.        After discounting the estimated tax

liability, Sims concluded a just appraisal of the ICC stock was $29,500.

      Prior to the scheduled sale of ICC, Henrichsen and Shelton had the

opportunity to review Sims’s appraisal.       Henrichsen and Shelton both

decided they agreed with Sims’s valuation.       Henrichsen wrote, “Sheriff

Longley I agree with the 29,500 value” and signed his name. Shelton

wrote, “I have review [sic] this appraisal and I agree with this” and signed

his name.

      At the sheriff’s sale, John Holtz, on behalf of Hunters Retreat, and
Monroe Branstad bid on the ICC stock. Holtz placed the highest bid at

$110,000. After Holtz’s bid of $110,000, the sheriff took a recess, and

after the recess, Branstad informed the sheriff he would not bid any

further. Branstad testified in a deposition that he planned to bid higher

on the property but, “It made me apprehensive or nervous that Mr. Holtz

kept saying that this thing has got so many things wrong with it that you

don’t want to touch it.”     Branstad also testified in a deposition that

during the recess Holtz asked him what his limit was and offered to

partner with Branstad on the property but refused to follow through on

the partnership offer after the sale.

      Daniels filed the instant suit against John Holtz and other entities

and individuals somehow connected to the ongoing dispute between

Holtz and Daniels, alleging a variety of claims including conspiracy,

fraud, denial of equal treatment, unjust enrichment, intimidation,

slander, and abuse of process.          Daniels asked the district court to

declare the sheriff’s sale void, enjoin the defendants from interfering with

his leasehold interest in the property, and award him actual and punitive
damages. The defendants moved for summary judgment. Daniels moved

to amend his petition to add nine causes of action, including deceit and
                                    7

collusion by the parties and their attorneys. The district court granted

the defendants’ motions for summary judgment and denied the motion to

amend.

      Daniels sought review. The court of appeals found the sale did not

have a “just appraisal” as required by statute because the appraisers

should not have factored in the potential capital gains tax liability. The

court of appeals denied Daniels’s other claims of error. Both defendants

and Daniels seek further review.

      II. Scope of Review.
      We review a district court grant of summary judgment for

correction of errors at law. Parish v. Jumpking, Inc., 719 N.W.2d 540,

542 (Iowa 2006). Summary judgment is proper only where no genuine

issue of material fact exists and the moving party is entitled to judgment

as a matter of law.   Iowa R. Civ. P. 1.981(3).   This court reviews the

record in the light most favorable to the nonmoving party. Lloyd v. Drake

Univ., 686 N.W.2d 225, 228 (Iowa 2004). All legitimate inferences will be

drawn in favor of the nonmoving party. Tetzlaff v. Camp, 715 N.W.2d
256, 258 (Iowa 2006). Denial of a motion to amend will only be reversed

where a clear abuse of discretion is shown. M–Z Enters., Inc. v. Hawkeye-

Sec. Ins. Co., 318 N.W.2d 408, 411 (Iowa 1982).

      III. Merits.

      Defendants sought summary judgment of Daniels’s claims that the

$95,000 assignment by the State of Iowa to Hunters Retreat was invalid

and the sheriff’s sale was illegal and invalid. The district court granted

summary judgment in favor of defendants on all of Daniels’s claims.

Daniels raises three points on appeal. First, Daniels argues the district
court should not have granted summary judgment regarding whether the

sheriff’s sale complied with statutory requirements.     Second, Daniels
                                     8

argues the district court should not have granted summary judgment

regarding whether the defendants engaged in acts that would require the

sheriff’s sale to be set aside.   Third, Daniels argues the district court

abused its discretion by failing to grant his motion to amend his petition.

      A. Just Appraisal.      A sheriff’s sale may be set aside by a court

“where the price obtained at a sheriff’s sale is so grossly inadequate as to

amount to unfairness or oppression.” Buter v. Slattery, 212 Iowa 677,

680, 237 N.W. 232, 233 (1931).       Iowa Code section 626.93 sets forth

requirements for conducting sheriff’s sales:

             Personal property . . . must be appraised before sale by
      two disinterested householders of the neighborhood, one of
      whom shall be chosen by the execution debtor and the other
      by the plaintiff . . . who shall forthwith return to said officer
      a just appraisement, under oath, of said property if they can
      agree; if they cannot, they shall choose another disinterested
      householder, and with that householder’s assistance shall
      complete such appraisement, and the property shall not,
      upon the first offer, be sold for less than two-thirds of said
      valuation; but if offered at the same place and hour of the
      day as advertised upon three successive days, and no bid is
      received equal to two-thirds of the appraised value thereof,
      then it may be sold for one-half of said valuation.

      Daniels contends the sheriff’s sale is invalid because there was no

“just appraisement” from disinterested householders, and the sale of ICC
was not for two-thirds of the value of a just appraisal. Daniels argues

Sims’s appraisal of $29,500 was not “just” because it discounted the

value of the corporation based on potential capital gains tax liability.

The main asset of ICC is land (the Lucas County property). Because ICC

paid $420,000 for the property originally and, as Sims, Henrichson, and

Shelton estimated, respectively, the property was now valued at around

$1,592,500, $1,004,000, or $1,643,821, a sale would result in a large
profit subject to taxation.
                                      9

      The court of appeals agreed with Daniels and held it was improper

for the appraisers to discount the stock based on the capital gains tax

liability. The court based its ruling on In re Marriage of Friedman, 466
N.W.2d 689 (Iowa 1991), a marriage dissolution case.           Marriage of

Friedman, 466 N.W.2d at 691. In Friedman, we held it was improper for

a trial court to discount the value of stock in dividing property between

former spouses, where one spouse would be retaining all of the stock

because it was a family-owned business. Id. We held that because there

was “no evidence that a sale was pending or even contemplated . . . the
effect of considering income tax consequences on a sale is to diminish

the asset value to the nonowning spouse.” Id.

      Federal case law has recently grappled with whether valuation of

corporate assets in the context of estate and gift tax should take capital

gains tax liability into account. Prior to 1986, capital gains tax liability

could be avoided by liquidating a corporation based on General Utilities &

Operating Co. v. Helvering, 296 U.S. 200, 206, 56 S. Ct. 185, 187, 80 L.

Ed. 154, 157 (1935), which held a corporation did not recognize a taxable

gain on a dividend distribution of appreciated property. The Tax Reform

Act of 1986 abrogated General Utilities, and removed a corporation’s

ability to avoid the capital gains tax. Eisenberg v. Comm’r, 155 F.3d 50,

54–55 (2d Cir. 1998).      Prior to 1986, corporate valuations did not

consider capital gains taxes because the taxes could be avoided. Recent

case law has shifted this approach.

      The Second Circuit concluded capital gains tax liability should be

considered, noting

      a hypothetical willing buyer, having reasonable knowledge of
      the relevant facts, would take some account of the tax
      consequences of contingent built-in capital gains on the sole
                                     10
      asset of the Corporation at issue in making a sound
      valuation of the property.

Id. The court further explained, “The issue is not what a hypothetical

willing buyer plans to do with the property, but what considerations

affect the fair market value of the property he considers buying.” Id.

      The Fifth Circuit held an asset-based approach to valuation should

always, as a matter of law, account for capital gains tax liability. Dunn v.

Comm’r, 301 F.3d 339, 352–54 (5th Cir. 2002).         Dunn explained that

under the asset-based approach, the value of a corporation is grounded

in the fair market value of its assets and liabilities, which are determined

by applying the hypothetical willing buyer and willing seller test. Id. at

353. When applying the hypothetical willing buyer and willing seller test,

the basic assumption is the assets will be sold. Id. Dunn noted that a

separate valuation approach—known as the earnings or cash-flow

approach—assumes the assets will be retained and therefore would not

discount the capital gains tax liability. Id.

      The Eleventh Circuit also held valuation of a corporation should be

discounted for capital gains tax liability. Estate of Jelke v. Comm’r, 507
F.3d 1317, 1333 (11th Cir. 2007). Estate of Jelke noted the “hypothetical

willing buyer is a rational, economic actor” and

      [c]ommon sense tells us that he or she would not pay the
      same price for identical blocks of stock, one purchased
      outright in the marketplace with no tax consequences, and
      one acquired through the purchase of shares in a closely-
      held corporation, with significant, built-in tax consequences.
Id.

      Daniels argues case law supporting a reduction based on capital

gains tax liability does not consider the potential application and use of a

section 1031 exchange.       Section 1031 of the United States Internal
Revenue Code provides that capital gains tax may be deferred in certain
                                     11

circumstances where property is exchanged for property “of like kind.”

26 U.S.C. § 1031(a)(1) (2006).     The policy behind this deferral is the

taxpayer has not received anything that can be used to pay taxes

because the property was simply exchanged for property of like kind.

The basis of the old property becomes the basis of the new property, with

adjustments.    Id. § 1031(d).   Therefore, the gain is still locked up in

property—just a different property—and the taxpayer has not realized a

gain for tax purposes.

      The IRS issued a fact sheet regarding 1031 exchanges. FS–2008–
18, issued in February 2008, explains that a section 1031 exchange

“allows you to postpone paying tax on the gain” and that “[g]ain is

deferred, but not forgiven, in a like-kind exchange.”           See Like-Kind

Exchanges Under IRC Code Section 1031,               IRS.gov,   (Feb.    2008),

http://www.irs.gov/newsroom/article/0,,id=179801,00.html.               As   the

fact sheet explains, “When the replacement property is ultimately sold

(not as part of another exchange), the original deferred gain, plus any

additional gain realized since the purchase of the replacement property,

is subject to tax.” Id. Because a like-kind property exchange only defers

tax liability, it does not necessarily affect a fair market value appraisal

using an asset-based approach.

      We conclude Daniels failed to raise a genuine issue of material fact

regarding whether the ICC appraisal was unjust because it discounted

the capital gains tax liability. Discounting capital gains tax liability is an

accepted part of an asset-based methodology for valuation and has been

approved by numerous federal courts. Daniels’s argument that it was

improper to consider the tax liability because there was no evidence of an
impending sale of the land does not change our conclusion. The asset-

based approach to valuation assumes a hypothetical rational economic
                                    12

buyer and we agree that in this circumstance, a hypothetical buyer of

stock would take into account any tax liabilities of the corporation.

      We do not hold appraisals of corporate assets must, as a matter of

law, discount any capital gains tax liability. Instead, the determination

required of our courts is whether the sheriff’s sale obtained a “just

appraisement.”   Iowa Code § 626.93.      We refrain from establishing a

blanket rule imposing a particular appraisal methodology.

      There may be circumstances where a discount for capital gains tax

liability leads to an unjust appraisal or a grossly inadequate price at
auction based on a failure to follow accounting principles. Here, Daniels

has not provided any evidence to suggest Sims deviated from accounting

principles.   In fact, the other two appraisers agreed with Sims’s

methodology. As Henrichsen explained during his deposition, although

he agreed there are various techniques to avoid the $600,000 capital

gains tax and there may be buyers out there who would attempt to utilize

those techniques, “it would be wrong for [Sims] to assume that that

particular one was the buyer or would be the buyer.          She needs to

assume the average Joe buyer.” Further, Sims is a CPA and Daniels has

not challenged her qualifications, other than to suggest she does not live

and work close enough to the property to be considered a “householder,”

an argument we will address below.

      Daniels makes an additional argument: the appraisals failed to

meet the statutory requirements because they were not completed by

“householders of the neighborhood.” Id. Two of the three appraisers do

not live or work in Lucas County. Henrichsen has an office in West Des

Moines. Sims has offices in the Des Moines area and Pella. Henrichsen
and Sims were asked to appraise the value of ICC, an Iowa corporation,

licensed to do business in the state of Iowa.      This appraisal was not
                                      13

simply limited to one piece of property, but of the corporation that owned

the property. Henrichsen and Sims both live and work in Iowa, and this

court considers them to be householders of the neighborhood for

purposes of evaluating the value of an Iowa corporation.

         Section 626.93 requires the appraisers to be “householders of the

neighborhood” to ensure the appropriate level of familiarity with the fair

market value of the appraised property. This court held, in 1874, that

an appraiser who lived thirty-five miles from the land in question was not

a householder of the neighborhood. Woods v. Cochrane, 38 Iowa 484,
485 (1874).     The dispute in Woods demonstrates the problem section

626.93 seeks to address: an unfairly low appraisal from an appraiser

unfamiliar with the “neighborhood.” The out-of-town appraiser in Woods

valued the property at $1360, but the plaintiff offered five witnesses who

all appraised the land at approximately $2880. Id.

         As we noted in Woods, however, “the word neighborhood is a

relative and indefinite term.” Id. The circumstances that existed in 1874

are dramatically different when compared with the circumstances of

2010. The appraiser in Woods traveled the thirty-five miles by railroad

and then buggy to visit the land in question. Id. The Des Moines area

and Pella are both within sixty miles of Chariton, Iowa. A distance of

thirty-five miles—or sixty miles—is no longer a substantial distance

requiring travel by railroad and buggy.       Since 1874, there have been

advancements in travel, communications, and large-scale farming. The

facts in this case are illustrative of the shift to larger farms, which results

in larger “neighborhoods.”      Daniels farmed properties in Jasper and

Lucas Counties, two Iowa counties that do not border each other. The
Lucas County property at issue in this dispute is approximately 1225

acres.
                                     14

      Additionally, the instant dispute focuses on the propriety of

factoring in capital gains tax liability to appraise an Iowa farm

corporation and is not limited to the appraised value of land.       CPAs

located in the Des Moines area and Pella are geographically close enough

to be “householders of the neighborhood” for this purpose because they

are experts who, thanks to advancements in communications, journals,

and seminars, can be expected to be qualified on factors relevant to

appraising an Iowa farm corporation, including assessing mortgages and

tax law.
      Daniels also argues Shelton was not a “disinterested” appraiser.

On July 20, 2006, the same date on which Shelton submitted his

appraisal and six days before the sheriff’s sale, Shelton sent a fax to

Verle Norris, an attorney whose wife Shelton had entered into business

arrangements with previously. The fax stated, “We need to keep on top

of this. Will be buying this farm in one year.” Shelton testified he made

this statement “[b]ecause the farm has been up for sale before, and [he]

figured the court case would bring it to a head.” Shelton also testified he

did not consider bidding at the sheriff’s sale auction.

      A disinterested person is one without pecuniary interest. See Cent.

Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257, 261 (Iowa 1991).

In Central Life, we set aside an appraisal award, which was adopted by

an appointed “umpire,” because the appraiser received a fee contingent

on the amount of the award and therefore had a “direct financial interest

in the dispute.” Id. at 260–62. The appraisal was over $500,000 higher

than another appraisal.      Id. at 258.    We held that this “concealed

pecuniary interest in the outcome is a sufficient ground for voiding the
award as a matter of law without a showing of prejudice.” Id. at 262.
                                    15

      Here, however, Shelton did not have a direct pecuniary interest.

Instead, should an asset of ICC be offered for sale in the future, Shelton

was interested in purchasing that asset. This more attenuated interest

does not require setting aside the sale under these circumstances.

Daniels does not complain that Shelton’s original appraisal was too low

and instead relies, in part, on this appraisal.    Daniels does object to

Shelton’s eventual agreement with the appraisal presented by Sims.

Daniels argues Shelton may have decided to agree with Sims because of

his personal interest. However, we have just rejected the argument that
the Sims appraisal was “unjust.”         The key distinction between the

Shelton and Sims appraisals—and that about which Daniels complains—

is Sims’s decision to discount the capital gains tax liability of ICC. We

agree with Sims that it was not improper in this instance to discount the

tax liability. Daniels does not suggest the Sims appraisal was too low for

any other reason. Although we do not condone Shelton’s behavior, and

in other circumstances it might require the vacation of a sheriff’s sale,

Daniels has not presented an argument to support overturning this sale.

      B. Interference at the Sale.       Daniels argues the sheriff’s sale

should be set aside because of interference by Holtz with the sale. We

have previously held, “It is a familiar rule that where the price obtained

at a sheriff’s sale is so grossly inadequate as to amount to unfairness or

oppression, a court of equity may interfere and vacate and set aside the

execution sale.”   Buter, 212 Iowa at 680, 237 N.W. at 233.            The

defendants argue, based on Buter, that this court is limited to reviewing

whether the price was “grossly inadequate.” Because the price obtained

at the sheriff’s sale was greater than the appraisal, defendants argue this
court must uphold the sale.
                                     16

      Although the quote in Buter focused on the price reached at the

auction, many courts also separately focus on the fairness of the process

of a judicial or sheriff’s sale.   Courts will invalidate judicial sales if

“ ‘there was fraud, unfairness or mistake in the conduct of the sale . . . or

. . . the price brought at the sale was so grossly inadequate as to shock

the conscience of the court.’ ” In re Food Barn Stores, Inc., 107 F.3d 558,

564 (8th Cir. 1997) (emphasis added) (quoting In re Stanley Eng’g Corp.,

164 F.2d 316, 318 (3d Cir. 1947)). In re Chung King, Inc., 753 F.2d 547,

550–51 (7th Cir. 1985), the Seventh Circuit Court of Appeals considered
whether a bankruptcy court properly set aside the sale of a debtor’s

property. The court separately addressed whether the sale could be set

aside for either (1) a grossly inadequate sales price or (2) “the basis of

compelling equities arising out of ‘fraud, mistake or a like infirmity.’ ”

Chung King, 753 F.2d at 550–51 (quoting In re Webcor, Inc., 392 F.2d
893, 899 (7th Cir. 1968)). There the court found fraud, mistake, or a like

infirmity could be the basis to set aside a sale. Id. at 551.

      In this context, courts also provide, a sheriff’s sale cannot be set

aside for irregularity, unfairness, or fraud without a demonstration of

prejudice. See Goldberg v. Frick Elec. Co., 770 A.2d 182, 194 (Md. 2001)

(“[Our sister states] have found that [sheriff’s or judicial] sales may be set

aside when, there has been some form of misrepresentation or mistake,

creating a prejudicial effect.” (Emphasis added.)); cf. Farmers Sav. Bank

v. Gerhart, 372 N.W.2d 238, 244 (Iowa 1985) (holding in the context of

mistake of law or fact, that “relief should be granted only when

enforcement of the sale would impose an oppressive burden on the party

seeking vacation”).
                                       17

      Therefore, we believe a price obtained at a sheriff’s sale that is so

grossly inadequate as to amount to unfairness or oppression is not the

only basis for a court to set aside the sale. Accordingly, we hold that

even without a grossly inadequate price, a court may set aside a sheriff’s

sale for irregularity, unfairness, or fraud causing a prejudicial effect on

the sale.

      Daniels contends there was fraud or unfairness in the sheriff’s sale

because Holtz discouraged Branstad from bidding above $110,000 by

claiming there were numerous problems with the stock and by falsely
offering to become business partners with Branstad. Branstad testified

in a deposition that Holtz told him:

      [T]his farm is not going to have a clear title, there is no way
      it’s going to be cleaned up, the title. The shares are
      convoluted, is what he called it. And that there could be as
      much as a million dollar lien on it, and that the books had
      been—he said suspiciously disappeared beforehand.

Branstad testified he didn’t think Holtz “could have tried much harder to

discourage than what he said. He was as negative as he possibly could

[be] on all aspects of the farm.”

      Branstad asked for a recess in the bidding at $110,000 because “it

made [him] apprehensive or nervous that Mr. Holtz kept saying that this
thing has got so many things wrong with it that you don’t want to touch

it.” Branstad testified that during the recess, Holtz approached him and

asked how high he intended to bid, and how much it would cost for

Branstad not to bid anymore. Branstad testified that he told Holtz he

believed it would be illegal to accept payment in exchange for ceasing to

bid, and Holtz said he wasn’t offering to do so, he was just asking.

Branstad said he would only stop bidding when he ended up owning the
farm and Holtz then offered to partner with him. After the sale, Branstad
                                     18

met up with Holtz, and Holtz told him they had broken the law, could not

be partners on the corporation, and refused to talk to Branstad any

further about the partnership agreement.

      Daniels argues Holtz’s behavior raises a question of fact regarding

whether there was fraud or unfairness in the bidding process that

requires the sale to be set aside.         A number of courts have held

interference with the competitive nature of the bid may require vacation

of a judicial sale. As the United States Supreme Court explained,

      it is quite uniformly the rule in this country, as in England,
      that while equity will not set aside a sale for mere
      inadequacy of price, it will do so if the inadequacy is so great
      as to shock the conscience or if there are additional
      circumstances against its fairness, such as chilled bidding.

Gelfert v. Nat’l City Bank of N.Y., 313 U.S. 221, 232, 61 S. Ct. 898, 902,

85 L. Ed. 1299, 1303 (1941) (emphasis added).

      In Cocks v. Izard, 74 U.S. 559, 561–62, 19 L. Ed. 275, 276 (1868),

the United States Supreme Court set aside a judicial sale where a tenant

falsely claimed to be bidding on the landlord’s behalf and was able to

convince others not to bid based on this misrepresentation. The court

stated:

            The law will not tolerate any influences likely to
      prevent competition at a judicial sale, and it accords to every
      debtor the chance for a fair sale and full price; and if he fails
      to get these, in consequence of the wrongful interference of
      another party, who has purchased his property, at a price
      greatly disproportioned to its value, equity will step in and
      afford redress, either by setting aside the proceedings under
      the sale, or by holding the purchaser to account.

Cocks, 74 U.S. at 562, 19 L. Ed. at 276.
      Mere discussions between bidders or agreements to become

partners at a judicial sale are not per se wrongful.             Magic City
Amusement Co. v. Hastings, 116 P.2d 709, 711 (Okla. 1941). Bidders are
                                         19

allowed to “make a purchase for their common benefit.”          Venner v.

Denver Union Water Co., 90 P. 623, 632 (Colo. 1907).           However, a

fraudulent offer of partnership could be considered an attempt to avoid

competition and depress the price of the property to be sold. See Venner,
90 P. at 632–33 (“The fact that an agreement to make a joint purchase

may indirectly operate to prevent the parties thereto from bidding is not

enough to render the transaction unlawful. To have that effect it must

appear that the object of the agreement was to avoid competition.”).

      Holtz argues Daniels has not raised a genuine issue of material
fact regarding fraud, irregularity, or unfairness. He points to Buter, in

which this court did not find evidence of fraud or irregularity in a

sheriff’s sale. Buter, 212 Iowa at 679–80, 237 N.W. at 233. In Buter,

however, the plaintiff alleged fraud and collusion between the trustees of

the bank and the purchaser in a conclusory fashion. Id. Here, Daniels

has presented admissible evidence that a bidder, Branstad, was

discouraged from bidding higher based on statements by Holtz regarding

problems with the stock and a false offer to become partners. Branstad

testified he was concerned about potential tax issues, but that he had no

intention of selling the farm if he successfully bought the ICC stock,

therefore deferring the tax liability.

      Although the bidding resulted in a sale price higher than the Sims

appraisal, Daniels has raised a genuine issue of material fact regarding

whether the sale was tainted by Holtz’s interference and whether Daniels

was prejudiced by Holtz’s actions. On remand, the fact finder must first

find whether there was irregularity, unfairness, or fraud in the sheriff’s

sale because of Holtz’s conduct with Branstad, and if there was, whether
the irregularity, unfairness, or fraud caused the corporation to be sold at

a lower price.    Whether the interference rises to a level necessary to
                                     20

invalidate the sale is a question of fact for the fact finder, which may be

influenced by the behavior of Holtz at the sale, whether Holtz truly

intended to partner with Branstad, Branstad’s willingness to bid higher

than $110,000, and whether there was any inequity in the price for

which the ICC stock actually sold. See Nat’l Oil & Gas, Inc. v. Gingrich,

716 N.E.2d 491, 496 (Ind. Ct. App. 1999) (“In determining whether to set

aside a [sheriff’s] sale, the trial court will take all relevant circumstances

into consideration, including the inadequacy of the price, the effect of

any procedural irregularities, inequitable conduct, evidence of mistake or
misapprehension, and problems with title.”).

      Although the sale was above the appraisal submitted by Sims and

agreed to by Shelton and Henrichsen, the evidence presented by Daniels

creates a genuine issue of material fact as to whether this particular

auction would have resulted in a higher sale price because Branstad was

willing to bid higher but was unfairly induced not to bid by a false offer of

partnership from Holtz. The appraisals are not the final word on the fair

market price of ICC, but an effort to “prevent property going for a song at

judicial sales.” See Gelfert, 313 U.S. at 232, 61 S. Ct. at 902, 85 L. Ed.

at 1303. If an auction bidder was willing to bid higher and was unfairly

discouraged, the fair market value of ICC may have been higher. The

price on its face is not grossly inadequate compared to the appraisals,

but the question is whether Holtz’s improper behavior resulted in a sale

price which was unfair compared to what it would have been had Holtz

refrained from his alleged interference with Branstad.

      C. Motion to Amend Petition. Daniels filed a motion to amend

his petition. The proposed amendment includes claims under Iowa Code
section 602.10113 for deception and collusion against Nervig and the

Brick Law Firm for alleged collusion with Holtz’s actions at the sheriff’s
                                     21

sale.   Daniels also seeks to add a cause of action against Nervig for

deception under section 602.10113 for allowing Holtz to falsely testify

during the WSH trial. Lastly, Daniels seeks to add claims against Nervig

and the Brick Law Firm under the disciplinary rules in the Iowa Code of

Professional Responsibility.    The district court summarily denied the

motion to amend.

        Iowa Rule of Civil Procedure 1.402(4) provides:

        A party may amend a pleading once as a matter of course at
        any time before a responsive pleading is served or, if the
        pleading is one to which no responsive pleading is required
        and the action has not been placed upon the trial calendar,
        the party may so amend it at any time within 20 days after it
        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.

Daniels originally filed his petition on February 26, 2007. Defendants

responded to the petition by filing motions for partial summary judgment

on April 16. On August 10, Daniels filed a motion to amend his petition.

Because the motion to amend was filed after the summary judgment

motions and more than twenty days after the petition was filed, Daniels

requested leave of the district court to amend his petition. The district

court denied the motion, finding “no factual support for any of these

claims” and that “they fail as a matter of law and fact.”

        We reverse a district court’s denial of a motion to amend only when

a clear abuse of discretion is shown. M–Z Enters., 318 N.W.2d at 411.

Nervig and the Brick Law Firm argue the district court did not abuse its

discretion in denying the motion to amend with regard to the remaining

claims because the factual and legal bases for these additional claims

were the same as those contained in the original petition. Therefore, by
                                            22

granting summary judgment to defendants, it was also proper to deny

the motion to amend as based on the same flawed arguments.

        Daniels has not appealed the district court’s grant of summary

judgment with regard to the claims related to the previous WSH trial.

Proposed cause of action number twenty-two is based on this previous

trial. Because the factual underpinnings were dismissed on summary

judgment by the district court, we agree the denial of the motion to

amend with respect to count twenty-two was not an abuse of discretion.

        Counts nineteen, twenty, and twenty-one all allege deception or
collusion under Iowa Code section 602.10113.               Counts nineteen and

twenty are asserted against Nervig and count twenty-one is asserted

against the Brick Law Firm, Nervig’s law firm. The district court did not

abuse its discretion in denying the motion to amend with regard to

counts nineteen, twenty, and twenty-one. Daniels appears to base his

claims of collusion against Nervig and the Brick Law Firm on Nervig’s

presence at the sheriff’s sale. The complaint, in a conclusory fashion,

asserts Nervig knew or had reason to know about Holtz’s action. Nervig,

however, is not alleged to have gone into the backroom for the discussion

between Holtz and Branstad.           The district court denied the motion to

amend because it found no factual support for the allegations.                  The

district court did not abuse its discretion.

        The district court also did not abuse its discretion in denying the

motion to amend with respect to counts twenty-three through twenty-

seven, all of which assert claims against Nervig and the Brick Law Firm

based    on   alleged    violations    of    the   Iowa   Code     of   Professional

Responsibility   for    Lawyers.       It    is well-established    that   attorney
disciplinary rules do not create a basis for civil liability. Brody v. Ruby,

267 N.W.2d 902, 907–08 (Iowa 1978) (“We hold the Iowa Code of
                                     23

Professional Responsibility for Lawyers furnishes no basis for a private

cause of action for negligence . . . .”); see also Iowa R. Prof’l Conduct 32,

pmbl., (“Violation of a rule should not itself give rise to a cause of action

against a lawyer nor should it create any presumption in such a case

that a legal duty has been breached.”).

      IV. Conclusion.

      Daniels failed to raise a genuine issue of material fact regarding

whether the sheriff’s sale should be set aside because his corporation,

ICC, failed to receive a just appraisement. Daniels did, however, raise an
issue of material fact regarding whether Holtz’s actions at the sale chilled

the bidding and unfairly or fraudulently caused another bidder to cease

bidding and, therefore, may require a court of equity to set aside the sale.

We remand for trial on this issue. The district court did not abuse its

discretion in denying Daniels’s motion to amend the petition.

      DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED IN PART; REVERSED IN PART; CASE

REMANDED.