Howard v. Schildberg Const. Co., Inc., 93-1638

• Decision Date: 29 March 1995
• Docket Number: No. 93-1638,93-1638
• Citation: 528 N.W.2d 550
• Parties: 131 Oil & Gas Rep. 275 Carlton V. HOWARD, Sr., Trustee under a Declaration of Trust of Which Carlton V. Howard, Sr. is Trustor, Appellant, v. SCHILDBERG CONSTRUCTION COMPANY, INC., An Iowa Corporation, Appellee.
• Court: Iowa Supreme Court

Page 550

528 N.W.2d 550

131 Oil & Gas Rep. 275

Carlton V. HOWARD, Sr., Trustee under a Declaration of Trust of Which Carlton V. Howard, Sr. is Trustor, Appellant, v. SCHILDBERG CONSTRUCTION COMPANY, INC., An Iowa Corporation, Appellee.

No. 93-1638.

Supreme Court of Iowa.

March 29, 1995.

Roger T. Stetson and Robert D. Sharp of Belin Harris Lamson McCormick, P.C., Des Moines, for appellant.

R. Jeffrey Lewis and S.P. DeVolder of Gamble & Davis, P.C., Des Moines, for appellee.

Considered by McGIVERIN, C.J., and HARRIS, LAVORATO, ANDREASEN, and TERNUS, JJ.

TERNUS, Justice.

Plaintiff brought this declaratory judgment action seeking relief from the burdens of a mining lease with the defendant. Plaintiff claimed that (1) the lease was unenforceable because it violated the agricultural land alienation restriction of the Iowa Constitution and (2) it could not be renewed for a third term because the lease did not provide for perpetual renewals. In the alternative the plaintiff claimed that the lease did not encumber the plaintiff's property north of the East Nodaway River. The district court rejected the plaintiff's arguments that the lease was unenforceable and nonrenewable and ruled that the lease encumbered all of the plaintiff's property.

Plaintiff appealed. Because we agree with the rulings of the trial court, we affirm.

I. Background Facts and Proceedings.

In 1960, Carlton V. Howard Sr., Walter Howard and Margaret Howard entered into a "limestone and gravel lease" with the Missouri Valley Limestone Company. The agreement described the leased premises to include the family farm which was located north and south of the East Nodaway River. It allowed Missouri Valley to use the land only for the purpose of mining limestone and gravel. The Howards rented that part of the land not being mined to others for the production of crops and livestock.

The mining lease provided for the payment of royalties or rent for an initial term of twenty years. It also contained the following renewal provision:

3. Renewal. If not in default hereunder at the expiration of this Lease or a renewal thereof, Lessee may renew the same for additional terms of 10 years, upon the same terms and conditions as provided in this Lease, so long as the limestone or gravel deposit is not exhausted, by giving Lessor written notice of Lessee's election so to do at least sixty (60) days before such expiration.

The lessee had complete discretion under the lease to determine the conduct of its mining operations. However, an addendum to the lease required that the lessee obtain the lessor's written permission to conduct operations on the property north of the river.

In 1963, Missouri Valley conveyed its interest in the lease to the defendant-appellee, Schildberg Construction Company. At the end of the original twenty-year term in 1980, Schildberg renewed the lease for an additional ten years. In 1982, the farm was transferred to a trust of which Carlton Howard (hereinafter "Howard") was the trustor and trustee. ¹

In 1990 Schildberg sought another ten-year extension of the lease. The trust objected to the second renewal and Howard filed this action in 1991. Howard sought to have the lease declared invalid and unenforceable. Alternatively, he asked the court to interpret the lease as not encumbering that portion of the farm north of the river.

Both parties filed motions for summary judgment. In its rulings on the motions and two subsequent motions filed pursuant to Iowa Rule of Civil Procedure 179(b), the district court held that the lease was valid and enforceable. The court concluded that the lease did not fall within the agricultural land alienation provision of the Iowa Constitution. It also concluded that the lease allowed multiple renewals. Finally the court ruled that a factual dispute existed with respect to whether the lease encompassed the property north of the river.

This remaining factual issue was tried to the court. The trial court found that the lease unambiguously encumbered the property north of the river. The court entered judgment for Schildberg. Howard appealed.

II. Scope of Review.

The parties dispute the scope of review. Howard claims the case was tried in equity and therefore, review is de novo. Schildberg contends that although the petition was filed in equity, the factual issue was tried at law.

We first note that even in an equity case, we do not find facts de novo in an appeal from a ruling on summary judgment. Farm & City Ins. Co. v. Anderson, 509 N.W.2d 487, 489 (Iowa 1993). Accordingly, our review of the court's ruling on the motions for summary judgment is on error. Id.

Our review of the court's decision after trial is governed by how the case was tried in the district court. Grinnell Mut. Reinsurance Co. v. Voeltz, 431 N.W.2d 783, 785 (Iowa 1988). The court's judgment characterized this action as one in equity. However, the trial judge ruled on objections, "normally the hallmark of a law trial." See Sille v. Shaffer, 297 N.W.2d 379, 381 (Iowa 1980).

Although we disapprove of the practice of making evidentiary rulings in equity cases, the fact that the trial judge did so does not automatically transform an equity case to one at law. See id. Where, as here, no one claims that the trial court improperly excluded evidence, the trial court's ruling on objections does not prevent a de novo review. Id. Therefore, we will review the court's judgment after trial de novo.

III. The Constitutional Restriction on Agricultural Land Alienation.

The Iowa Constitution provides:

No lease or grant of agricultural lands, reserving any rent, or service of any kind, shall be valid for a longer period than twenty years.

Iowa Const. art. I, § 24. We must decide whether the lease between the trust and Schildberg is a "lease ... of agricultural lands." A similar, but not identical, issue was involved in Trustees of Green Bay Levee & Drainage District v. Alexander, 252 Iowa 801, 108 N.W.2d 593 (1961).

In the Alexander case, a power company entered into a settlement contract with landowners who had objected to the establishment of a drainage district. Alexander, 252 Iowa at 805, 108 N.W.2d at 595. The company promised the property owners that they would be assessed only five cents per acre annually in return for the landowners' agreement to the inclusion of their land in the drainage district. Id. The property owners later sought to have the contract declared invalid under the agricultural alienation provision. Id. at 812, 108 N.W.2d at 600. We held that article I, section 24 did not prohibit this contract because it was not a "lease or grant." Id. We said, "A lease or grant of agricultural land is a contract for the possession and profits of land." Id.

The present case takes the Alexander analysis one step further. The issue here is whether an agreement for the possession and profits of land for solely non-agricultural purposes is a "lease or grant of agricultural lands," as those words are used in article I, section 24. We did not answer that question in Alexander.

In deciding the meaning of this constitutional provision, we strive to ascertain the intent of the framers. Redmond v. Ray, 268 N.W.2d 849, 853 (Iowa 1978). We give the words used by the framers their natural and commonly-understood meaning. Id. However, we also examine the constitutional history and consider "the object to be attained or the evil to be remedied as disclosed by circumstances at the time of adoption." Id. Thus, we begin with a review of the purpose of article I, section 24.

Our constitutional limitation on the term of agricultural leases originated in the New York Constitution of 1846. Casey v. Lupkes, 286 N.W.2d 204, 206 (Iowa 1979). Such restrictions were intended to prevent oppressive, long-term leases of manorial land to tenants who had no incentive to improve the land. Id. at 205. As the New York Court of Appeals stated in 1900:

The evil aimed at by the constitution is long leases of farming lands for farming purposes, not the ... erection of dwelling houses, stores, or manufactories, or of a mine in the bowels of the earth, with the right to bring ore to the surface and ship it.

Massachusetts Nat'l Bank v. Shinn, 163 N.Y. 360, 57 N.E. 611, 613 (1900).

Consistent with this purpose, the New York court concluded in Shinn that a mining lease did "not come within the spirit of the constitutional prohibition." Id. The court observed that the lease "was not a lease of agricultural lands for agricultural purposes, but of mineral lands for mining purposes." Id. The court reached this conclusion even though the land encumbered by the lease was suitable for farming and was used for agricultural purposes to the extent the land was not required for mining purposes. Id.

Other states with similar constitutional provisions have also held that a lease of agricultural land for non-agricultural purposes only does not fall within the constitutional restriction. De Grasse v. Verona Mining Co., 185 Mich. 514, 152 N.W. 242, 250 (1915) (fifty-year lease of agricultural land for purpose of mining ore was valid because it expressly prohibited any agricultural use); Bookout v. White, 123 Mont. 459, 214 P.2d 861, 863 (1950) (upholding ninety-nine year lease of half an acre of land with a cabin for hunting and recreational use); Berry-Iverson Co. of N. Dakota, Inc. v. Johnson, 242 N.W.2d 126, 132 (N.D.1976) (lease of longer than permissible duration upheld because it was for use of land as a radio transmitter tower site); Ryan v. Sioux Gun Club, 68 S.D. 345, 2 N.W.2d 681, 683 (1942) (interpreted a similar constitutional provision to permit leases that excluded agricultural use of the land).

We join with these courts and hold that our constitutional agricultural land alienation restriction does not apply to agricultural land leased for purely non-agricultural purposes. Because the lease between the trust and Schildberg is clearly limited to use of the land for...