Agvantage FS, Inc. v. W. Farming, Inc.
| Decision Date | 13 July 2011 |
| Docket Number | No. 1-311 / 10-1820,1-311 / 10-1820 |
| Parties | AGVANTAGE FS, INC., Plaintiff-Appellant, v. WESTERN FARMING, INC., MICHAEL J. BOOTH, and KIMBERLY BOOTH, Defendants-Appellees. |
| Court | Court of Appeals of Iowa |
Appeal from the Iowa District Court for Franklin County, James M. Drew, Judge.
AgVantage FS, Inc. appeals from the district court's ruling which granted the Booths' motion to quash execution. AFFIRMED.
Tara Z. Hall and Mark D. Walz of Davis, Brown, Koehn, Shors & Roberts, P.C., West Des Moines, for appellant.
Christopher O'Donohoe and Thais Ann Folta of Elwood, O'Donohoe, Braun & White, L.L.P., Cresco, for appellees.
Heard by Eisenhauer, P.J., and Potterfield and Tabor, JJ.
In April and May 2006, Western Farming, Inc. entered into four separate Hedge to Arrive Purchase Agreements (HTAs) with AgVantage FS, Inc. promising to deliver corn by December 2007 and March 2008. In August 2007, Western Farming exercised its right under the agreements to "roll" the four HTAs to extend the delivery date to July 31, 2008. In July 2008, Western Farming had sold all of its corn on the open market, and had none with which to honor its rolled HTAs with AgVantage FS.
Michael and Kimberly Booth own the farming corporation known as Western Farming, Inc. In July 2006, they obtained an interest in Chickasaw County real estate, which they claimed as their homestead. They later sold this property and purchased property in Franklin County, which they intended to be their homestead.
In February 2007, the Booths entered into a "FS Agri-Finance Line of Credit Note and Security Agreement" with AgVantage FS to finance their farming operations, and agreed to be jointly and severally liable for "all indebtedness" of Western Farming.
When Western Farming failed to honor its rolled HTAs with AgVantage, AgVantage sued both Western Farming and the Booths in Chickasaw County district court: Western Farming for breach of contract; the Booths on the 2007 Line of Credit Note and Security Agreement in which they guaranteed the debt of Western Farming, Inc. AgVantage obtained summary judgment against Western Farming in January 2010, and obtained a judgment against the Booths in April 2010.
AgVantage sought to execute on the April 9, 2010 judgment it obtained against the Booths in Chickasaw County. AgVantage levied upon real estate owned by the Booths in Franklin County and a sheriff's sale was set for September 8, 2010. The Booths moved to quash execution claiming the real estate was their homestead and therefore exempt. Because we agree with the district court that the debt upon which AgVantage bases its right to execution did not precede the Booths' acquisition of their homestead, the district court did not err in granting the motion to quash.
On July 31, 2006, the Trustee of the Franklin and Patsy Booth Revocable Trust (Trust), conveyed to Michael J. Booth and Kimberly Booth an undivided one-half interest1 in real property in Chickasaw County, upon which was the Booths' homestead. The Booths and the Trust began attempting to sell the Chickasaw County property in July 2009. In February 2010, the Booths purchased an undivided one-half interest in a 41.65-acre tract of undeveloped timberland in Franklin County,2 which they intended to be their homestead upon the sale of the Chickasaw County property. The Chickasaw County property was sold at auction on March 12, 2010; closing was in April.
On April 9, 2010, AgVantage was granted judgment in a Chickasaw County action against the Booths based upon their guarantee of indebtedness of Western Farming, Inc.
On April 13, 2010, AgVantage filed a "Praecipe—Request for Execution" against the Booths in Chickasaw County, which, with a minor exception, was returned unsatisfied.
On April 19, 2010, the Chickasaw County judgment was transcribed to Franklin County.
On June 17, 2010, AgVantage filed a Praecipe—Request for Execution with the Franklin County Clerk .
On July 14, 2010, notice was issued of a September 8, 2010 sheriff's levy and sale of the Franklin County property in which the Booths had a one-half interest.
On August 13, 2010, the Booths moved to quash execution, claiming the Franklin County property was acquired with the proceeds from the sale of their previous homestead and that "Patsy Booth, beneficial owner of the other one-half undivided interest also has her homestead on the premises to be sold." AgVantage resisted, arguing that by way of the Line of Credit Note and Security Agreement and Western Farming's four 2006 HTAs the Booths' were indebted to AgVantage in April and May 2006, before the Booths obtained interest in the Chickasaw County property. AgVantage contended this was an antecedent debt for which the homestead could be sold under Iowa Code section 561.21 3
After hearing testimony and arguments, receiving exhibits, and taking judicial notice of the Chickasaw action, the Franklin County district court granted the motion to quash. With respect to the claim that the Booths' debt was incurred prior to acquisition of the homestead, the district court noted AgVantage's petitionin Chickasaw County against Western Farming and the Booths "alleged a breach of certain hedge to arrive contracts executed in 2007" and "contained no reference to any prior agreements," and the Chickasaw County trial court "based its ruling on a February 6, 2007 Line of Credit Agreement." The court ruled the debt was incurred in 2007, which was after the time the Booths acquired their homestead in Chickasaw County.
As to the Booths' claim that the Franklin County property was protected by their homestead rights, the district court found:
The Booths have not yet lived on the Franklin County property. A modular home, that was purchased prior to the sale of the Chickasaw County property, has been placed on the property but is not yet ready to occupy. The Booths intend to reside in the new home once it is ready.
The court concluded:
A delay between selling a homestead and erecting a new one does not negate a homestead claim in the property being developed. Magel v. Hunt, 265 N.W. 119 (Iowa 1936); Elliott v. Till, 259 N.W. 460 (Iowa 1935). The Booths purchased the structure to be erected on the Franklin County property prior to selling the Chickasaw County property. They have not taken any other residence and it is clear they have always intended to live on the Franklin County property. Accordingly, the court concludes the property at issue is the Booths' homestead.
AgVantage filed an Iowa Rule of Civil Procedure 1.904 motion to expand, which was denied.
AgVantage appeals, arguing the district court erred in finding: (1) the Booths' guarantee did not constitute an antecedent debt under Iowa Code section 561.21(1); (2) the Franklin County property is exempt as homestead; and (3) the Franklin County property is entirely exempt from execution.
AgVantage argues our review of this action is de novo because "the basis of the Booths' action was to enjoin the sheriff's sale scheduled to satisfy AgVantage's judgment." The Booths, however, contend the action was tried at law and thus our review is on error. They also assert that because the grant of the motion to quash was based on statutory construction, our review is for errors of law. While the result is not entirely clear, we find the Booths have the better argument.
The disposition of this case turns on the construction of sections 561.16 and 561.21(1). The question before us is whether the district court erred in concluding the Franklin County property was "exempt from judicial sale" because it did not fit into a "special declaration of statute to the contrary." Iowa Code § 561.16. We review a district court's ruling on a motion to quash based on statutory construction for errors at law. See War Eagle Village Apartments v. Plummer, 775 N.W.2d 714, 717 (Iowa 2009); Estate of Ryan v. Heritage Trails Assocs., Inc., 745 N.W.2d 724, 728 (Iowa 2008) (). Consequently, our review is for correction of errors at law.
AgVantage obtained a judgment against the Booths in Chickasaw County in April 2010. The judgment was transcribed to Franklin County and AgVantage attempted to execute on its judgment against the Franklin County property in which the Booths have an undivided one-half interest. See Iowa Code § 626.12 ().
Under Iowa Code section 624.23(1), judgments in the district court "are liens upon the real estate owned by the defendant at the time of such rendition." However, "[a] judgment lien must properly attach to property before that property can be used to satisfy the judgment." Barrata v. Polk Co. Health Servs., 588 N.W.2d 107, 112 (Iowa 1999); see also Iowa Code §§ 624.23, .24. "[A] judgment lien generally cannot attach to land used and occupied as a homestead and land designated as a homestead generally cannot be executed upon to enforce a judgment lien." Barrata, 588 N.W.2d at 110; see also Iowa Code § 561.16 ().
AgVantage relies on the statutory exception to this general rule of exemption from judicial sale: "[t]he homestead may be sold to satisfy debts . . . contracted prior to its acquisition." Iowa Code § 561.21(1). Thus, the timing of the Booths' indebtedness is crucial.
AgVantage argues the Booths' debts arose when Western Farming entered into HTA contracts in 2006. We reject this contention for several reasons.
First, the HTA contracts upon which AgVantage now relies are between Western Farming...
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