Newhall v. Roll

• Decision Date: 23 December 2016
• Docket Number: No. 14-1622,14-1622
• Citation: 888 N.W.2d 636
• Parties: Russell L. NEWHALL, Appellee, v. Marcia Elaine Newhall ROLL, Appellant.
• Court: Iowa Supreme Court

888 N.W.2d 636

Russell L. NEWHALL, Appellee,

v.Marcia Elaine Newhall ROLL, Appellant.

No. 14-1622

Supreme Court of Iowa.

Filed December 23, 2016

Thomas D. Hanson of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for appellant.

Mark McCormick of Belin McCormick, P.C., Des Moines, and Megan R. Rosenberg of Cady & Rosenberg Law Firm, P.L.C., Hampton, for appellee.

HECHT, Justice.

In this partition action, the plaintiff sought partition by sale of one tract of real estate located in Hardin County and another tract located in Butler County. The defendant opposed the proposed partition by sale, preferring partition in kind instead. On appeal from the district court's decision ordering the sale of both tracts, the court of appeals reversed. On further review, we conclude the defendant failed to prove it would be equitable and practicable to partition the tracts in kind and therefore vacate the decision of the court of appeals and affirm the district court's judgment.¹

I. Background Facts and Proceedings.

Russell Newhall and Marcia Roll are biological siblings who own two farm properties as tenants in common. The first tract, located in Butler County, was transferred to Russell and Marcia by inter vivos gift from their parents in 2006. The second tract, located in Hardin County, was transferred to Russell and Marcia in 2011 through a testamentary gift from their biological aunt. Russell owns several grain bins and a grain dryer on the Butler County land.

The Butler County tract and the Hardin County tract are both subject to leases. Russell leases and farms the tillable portion of the Butler County farm.² Third parties rent pastureland on both the Butler and Hardin County tracts.

Russell and Marcia have an acrimonious relationship, and Russell sought to sever their interests in the two tracts by agreement on multiple occasions before this litigation was commenced. In October 2007, Russell offered to sell his interest in the Butler County land to Marcia. In May 2012, Russell again offered to sell his interest in the Butler County land or to trade it for Marcia's interest in the Hardin County land. On each occasion, Marcia expressed no interest in Russell's proposed partition of the tracts.

A. The Consolidated Actions. In March 2013, Russell filed separate actions against Marcia in Butler and Hardin counties seeking a judicial partition by sale of both tracts. Marcia responded by requesting the properties be partitioned in kind. The two actions were consolidated for trial in Butler County upon joint motion of the parties.

At the trial, both parties presented evidence of the nature and value of the properties. The tract in Butler County consists of 315.30 acres—115 acres devoted to row crops, approximately 150 acres of pastureland and timberland, and the remainder devoted to hay ground and buildings. Russell's expert appraised the Butler County land at $929,000 (excluding the value of the grain bins purchased and installed there by Russell). Marcia's expert appraised the property at a fair market value of $1,200,000 (including the value of the grain bins).

The Hardin County tract consists of 162.92 acres—approximately 110 acres of tillable land and the remainder in pastureland. Russell's expert appraised the Hardin County land at a fair market value of $778,000; Marcia's expert opined that the property's fair market value is $620,000.

Without the value of the grain bins factored in, the difference between the market values of the two properties according to the experts ranged from $151,000 (Russell's expert) to $535,500 (Marcia's expert). After reviewing the experts' methodology and hearing their testimony, the district court found the experts were both "very credible."

B. The Parties' Positions in District Court. At trial, Marcia urged the court to award Russell the Hardin County property and make a specific allotment of the Butler County property to her under Iowa Rule of Civil Procedure 1.1216. See Iowa R. Civ. P. 1.1216 (permitting the trial court to allot a specific tract to a specific party). Because the land in Butler County was worth more than the land in Hardin County, Marcia proposed that the distributions could be equalized if the court awarded Russell an additional sum of money or about 70 acres from the Butler County farm, consisting primarily of pasture and hay land.

Russell urged the partition be achieved through a sale of both tracts. In the alternative, Russel requested the Butler County tract be allocated to him if the court were to choose an in-kind distribution in lieu of a sale. Although both parties expressed a desire to receive the Butler County land if the land were partitioned in kind, neither party opposed the sale of the Hardin County land.

The parties presented testimony explaining why the court should award the Butler County land to them if a partition in kind were to be ordered. Both parties were raised there on the family farm, and each claimed an emotional connection with the land and a desire to pass it on to their children who are interested in farming the ground. Although Russell relocated to North Dakota in 2008, he maintained his vocational connection with the Butler County farm, having raised row crops there since 1974.

Marcia claimed a stronger tie to the Butler County farm because she lives nearby and developed her avocation of collecting and selling antiques on the farm. She further asserted the family farm should be allocated to her because she stayed in Iowa to take care of her parents in their old age while Russell moved to North Dakota in 2008. Marcia also opposed partition by sale of the Butler County tract because a sale would cause her to incur a tax liability in the range of $145,000 to $164,000.

C. The District Court's Decision. The district court concluded Marcia did not meet her burden to prove a partition in kind would be equitable and practicable. The court found Marcia's proposed division of the Butler County farm—with the tillable land allocated to her and pasture and hay ground allocated to Russell—would diminish the aggregate value of the property. The court also found the Butler County and Hardin County tracts carried substantially different tax bases, which would complicate efforts to equitably divide the land through an in-kind distribution. Specifically, the party receiving the Hardin County land would receive land with a stepped-up basis while the party receiving all or most of the Butler County land would receive property with a very low basis.

Marcia appealed. We transferred the case to the court of appeals.

D. Court of Appeals Decision. The court of appeals reversed in a split decision, concluding that Marcia proved it is both equitable and practicable to award Russell the Hardin County tract, award Marcia the Butler County tract, and order an equalization payment of $75,000 from Marcia to Russell.³ We granted Russell's application for further review to determine whether the district court erred in ordering partition by sale of the Butler County and Hardin County tracts under the circumstances of this case.

II. Scope of Review.

Actions to partition real or personal property are equitable proceedings, which we review de novo. Iowa R. Civ. P. 1.1201(1) ; Iowa R. App. P. 6.907 ; see also Martin v. Martin , 720 N.W.2d 732, 735 (Iowa 2006). In equity cases, the trial court's findings of fact are not binding on us, but we give them weight, especially when they concern a witness's credibility. Iowa R. App. P. 6.904(3)(g ) ; Martin , 720 N.W.2d at 735.

III. Analysis.

Our analysis in this case begins with an overview of the legal principles governing partition actions in Iowa. With those principles in mind, we shall determine whether the district court erred in rejecting Marcia's request for a partition in kind in lieu of sale.

A. Rules Governing Partition Actions in Iowa. Partition actions are governed by Chapter 651 of the Iowa Code and Division XII of the Iowa Rules of Civil Procedure. See Iowa Code §§ 651.1 –.6 (2014); Iowa Rs. Civ. P. 1.1201 –1.1228. Together with the relevant statutory provisions, the applicable procedural rules establish "a rough legal blueprint" for partitioning concurrently owned real or personal property. N. William Hines, Joint Tenancies in Iowa Today , 98 Iowa L. Rev. 1233, 1249–50 (2013).

Prior to the effective date of the Iowa Rules of Civil Procedure in July 1943, partition in kind was favored over partition by sale. Spies v. Prybil , 160 N.W.2d 505, 507 (Iowa 1968). At common law and under the previous statutory framework, property was partitioned in kind unless the parties agreed to a sale or the property could not "be equitably divided into the requisite number of shares." Id. ; see also Iowa Code § 12326 (1939); Metcalf v. Hoopingardner , 45 Iowa 510, 511–12 (1877) (noting the statute permitted partition by sale only if the property could not equitably be divided in kind). But "[t]his is no longer true in Iowa." Spies , 160 N.W.2d at 508. The rules adopted in July 1943 effected a "change in emphasis." Id . at 507 (quoting an advisory committee comment to then Iowa Rule of Civil Procedure 278). We explained in Spies that the new rule "is unequivocal in favoring partition by sale and in placing upon the objecting party the burden to show why this should not be done in the particular case." Id. at 508.

Under the present framework, a co-owner of real or personal property may request a judicial partition of the property in one of two ways: (1) partition by sale or (2) partition in kind. Iowa R. Civ. P. 1.1201 ; cf. Iowa Code § 651.3 (2014) (permitting partial partitions in kind). In a partition by sale, the property is sold and the sale proceeds are distributed according to the parties' respective interests. 59A Am. Jur. 2d Partition § 117, at 94 (2015). When real estate is partitioned in kind, the property is divided into parcels, and the parcels are allotted to the parties by share. 68 C.J.S. Partition §§ 1, 146, at 91, 131 –32 (2009). The party...