Iowa Arboretum, Inc. v. Iowa 4-H Found.

• Citation: 886 N.W.2d 695
• Decision Date: 28 October 2016
• Docket Number: No. 15–0740.,15–0740.
• Parties: IOWA ARBORETUM, INC., Appellee, v. IOWA 4–H FOUNDATION, Appellant.
• Court: United States State Supreme Court of Iowa

886 N.W.2d 695

IOWA ARBORETUM, INC., Appellee,

v.IOWA 4–H FOUNDATION, Appellant.

No. 15–0740.

Supreme Court of Iowa.

Oct. 28, 2016.

David H. Skilton of Cronin, Skilton & Skilton, P.L.L.C., Nashua, and Thaddeus Cosgrove of Cosgrove Law Firm, Holstein, for appellant.

Ryan G. Koopmans and Kristina M. Stanger of Nyemaster Goode, P.C., Des Moines, for appellee.

ZAGER

, Justice.

We are asked to determine whether the district court properly granted summary judgment on the plaintiff's petition for declaratory relief and properly denied the defendant's motion for summary judgment. Iowa Arboretum, Inc. (Arboretum) and Iowa 4–H Foundation (4–H Foundation) entered into an agreement to develop an arboretum on 300 acres of land owned by the 4–H Foundation and located in Boone County, Iowa. Later, the parties entered into a ninety-nine-year lease agreement for the same tract of land, some of which included land suitable for agriculture. The majority of the land is used by the Arboretum as an arboretum open to the public. The landowner, 4–H Foundation, now alleges the land is agricultural for purposes of article I, section 24 of the Iowa Constitution

and the ninety-nine-year lease is void as it violates the constitutional proscription on agricultural leases exceeding a term of twenty years. The 4–H Foundation served the Arboretum with a notice of termination of tenancy based on this constitutional provision. The Arboretum responded by filing a petition for declaratory judgment and injunctive relief to establish the validity of the lease. The parties filed competing motions for summary judgment. The district court granted declaratory relief to the Arboretum and determined the subject land was not agricultural, declared the lease valid, and ordered the 4–H Foundation to comply with the terms of the lease. The 4–H Foundation appeals from the denial of its motion for summary judgment. For the reasons set forth below, we affirm the decision of the district court. Since the land in question is not agricultural land for purposes of article I, section 24 of the Iowa Constitution, the lease is valid and enforceable.

I. Background Facts and Proceedings.

The Arboretum owns a forty-acre tract of land in rural Boone County, located south of the city of Boone and northwest of the town of Madrid. The 4–H Foundation owns a 300–acre tract of land immediately south of the land owned by the Arboretum, which is the subject of this case. The legal description of the land is:

NE 300 acres of the Iowa 4–H Camping Center (the SE1/4 of SE1/4 of Section 3; the NE1/4 and SE1/4 of NE1/4 of Section 3; all of the SW1/4 of Section 2 and Lot 1 of NW1/4 of NW1/4 of Section 11; all in Township 82 North, Range 26 West of the 5th Principal Meridian, Douglas Township, Boone County, Iowa.

The property is zoned as agricultural. The Arboretum has rented the 300–acre tract of land since 1969 and utilizes it and its own forty-acre tract of land to maintain a public arboretum.

On July 1, 1969, the parties signed a Memorandum of Understanding (MOU). The document begins by providing its purpose:

It is the mutual desire of the Arboretum and the 4–H Foundation that 300 acres of land belonging to the 4–H Foundation ... and adjacent to 40 acres of land owned by the Arboretum be utilized for public arboretum development by the Arboretum.

In pertinent part, the Arboretum agreed “[t]o develop the NE 300 acres of the Iowa 4–H Camping Center ... as part of the arboretum for use by the 4–H Camp participants, without charge, and the general public.” The Arboretum also agreed to allow “the 4–H Foundation to continue to farm the present crop acres ... until the Arboretum is ready to develop any of the crop areas for arboretum purposes.”

The 4–H Foundation agreed to “lease the 300 acre tract ... to the Arboretum, Inc. for development into an arboretum.”

It further agreed that, because the tract of land is adjacent to land already owned by the Arboretum, it would “be a continuous and unified arboretum under the operation of the Arboretum.”

The parties mutually decided that the “Memorandum of Understanding shall comprise an agreement of long term intent for development and maintenance of the arboretum.” The MOU contemplated that it would be implemented by consecutive five-year leases. The leases would be reviewed at the end of every fourth year and revised as appropriate before the parties entered into the next five-year lease. The MOU would “remain in force continuously and as modified by the detailed five year leases.” In the event that either party decided to sell their land, the other was entitled to the right of first refusal to purchase the property. Finally, if the MOU was terminated, the Arboretum was required to “restore as nearly as practical the premises to the same condition as that existing at the time of entering into this Memorandum of Understanding.”

On March 1, 1980, the parties entered into a cash-rent lease intended to supplement the MOU. The 4–H Foundation leased “to the Arboretum for development as part of the Arboretum, the 300 acre tract of property” described in the MOU. In contrast to the consecutive five-year leases contained in the MOU, the parties agreed to a lease for a term of ninety-nine years. The 300–acre tract included 250 acres of timberland, which the Arboretum leased for $1.00 per year. In addition, with respect to the remaining fifty acres which consisted of tillable land, the Arboretum was given, in effect, an option to lease any portion thereof. If the Arboretum chose to exercise this option, the lease provided a formula for determining compensation for the tillable cropland. This formula was based on the accrual net farm income that the 4–H Foundation earned on the land prior to the Arboretum exercising the lease option.

The parties have been operating under the MOU since 1969 and the lease since 1980. In 1983, the Arboretum's board of directors voted to renew the lease with no changes. In 1990, the Arboretum notified the 4–H Foundation that it intended to lease a portion of the tillable cropland to restore it to native prairie grasses. In 1992, the Arboretum's board again approved the lease. In 2004, the property committees of the 4–H Foundation and the Arboretum met to discuss the lease. The members recommended meeting again in 2009. The 4–H Foundation board and the Arboretum board met in 2005 to discuss the terms of the lease but made no further changes. At that time, one of the 4–H Foundation's trustees suggested meeting again in five years to review the lease. However, the parties did not meet again, and neither party ever requested a meeting to review the lease. The Arboretum made its rental payments through 2013. It tendered rent payments in 2014 and 2015 while this action was pending, but the 4–H Foundation did not cash the rent payments.

The Arboretum developed the majority of the land for use as an arboretum. It also paid an “annual cash rent” for tillable cropland every year. Of the 300–leased acres, 250 acres function as the arboretum. Another 7.1 acres are billed under the tillable cropland formula contained in the 1980 lease. Although this land is billed as tillable crop land, the Arboretum actually uses it as a restored prairie and a parking lot for the public visiting the arboretum. Of the remaining 39.9 acres, all but three acres remain in the possession of the 4–H Foundation under the USDA's Conservation Reserve Program (CRP). Prior to being in the CRP, Hertz Farm Management (Hertz) farmed the acres as row crop. Hertz currently farms the three acres that are not in the CRP for the 4–H Foundation.

On or around August 28, 2013, the 4–H Foundation served a notice of termination of tenancy on the Arboretum. The notice listed the effective termination date as February 28, 2014. On February 28—the date the termination was to take effect—the Arboretum filed a petition and motion for writ of injunctive relief. The petition alleged the 4–H Foundation termination resulted in a breach of the 1980 lease. The Arboretum sought injunctive relief in the form of a temporary injunction, declaratory judgment establishing the validity of the lease, and specific performance of the lease. The Arboretum also requested attorneys' fees. The district court scheduled a hearing on the petition for March 31. On March 8, the 4–H Foundation served the Arboretum with a notice to quit, asserting that the Arboretum was an unlawful holdover tenant. The notice demanded the Arboretum immediately vacate the premises.¹

On March 24, the 4–H Foundation filed a forcible entry and detainer (FED) action in Boone County small claims court. In the FED action, the 4–H Foundation stated that the Arboretum was served with a notice of termination of lease and a notice to quit, but had failed to vacate the premises and was holding over. The 4–H Foundation did not include any information about the pending action before the district court to determine the validity of the lease between the parties. The small claims court set a hearing for April 7.

The day after filing the FED action, the 4–H Foundation filed a motion in district court to continue the hearing on the Arboretum's motion for a temporary injunction. The Arboretum resisted the motion to continue on the grounds of urgency created by the 4–H Foundation filing the FED action. The Arboretum also requested that, if the district court ordered a continuance, it also order a continuance of the FED action until after it decided the declaratory judgment action.² The district court denied the 4–H Foundation's motion to continue.

The district court held a hearing on March 31 to consider the Arboretum's request for a temporary injunction and the 4–H Foundation's motion to dismiss. At the hearing, the 4–H Foundation argued the lease between the parties violated the Iowa Constitution because of its length of years and therefore its termination of tenancy was proper. The 4–H Foundation further argued that the Arboretum had no right of recovery. The...