Ronald Peck v. Four Aces Farms, Inc. ( 2015 )

IN THE COURT OF APPEALS OF IOWA
No. 14-1482
Filed August 5, 2015
RONALD PECK,
Plaintiff-Appellee,
vs.
FOUR ACES FARMS, INC.,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Poweshiek County, Annette J.
Scieszinski, Judge.
Four Aces Farms, Inc. appeals from the district court’s order granting a
declaratory ruling and judgment in favor of Ronald Peck. AFFIRMED AS
MODIFIED.
Catherine M. Lucas and Todd A. Strother of Bradshaw, Fowler, Proctor
& Fairgrave, P.C., Des Moines, for appellant.
William J. Lorenz and Norma J. Meade of Moore, McKibben, Goodman
& Lorenz, L.L.P., Marshalltown, for appellee.
Heard by Danilson, C.J., and Vaitheswaran and Doyle, JJ.
2
DOYLE, J.
Four Aces Farms, Inc. (“Four Aces”) appeals from the district court’s
declaratory ruling and final judgment order concluding an oral 50/50 crop share
agreement supplemented its written cash rent lease agreement with Ronald
Peck. We are not persuaded Peck established his case by the requisite degree
of proof and we therefore modify the district court’s declaratory ruling and
judgment.
I. Background Facts and Proceedings
Ronald Peck is a retired farmer and businessman who owns 690 acres of
farmland in Poweshiek County, Iowa. Peck farmed the 690 acres himself until
November 2006, when he decided to lease the property to Four Aces. Four
Aces, an Iowa Corporation, is operated by Douglas Helm, a former math teacher
who began farming full time in 2001. Mark Kennett, an agronomics consultant
and Peck’s then-partner in a chicken litter1 application venture, facilitated the
landlord-tenant relationship between Peck and Helm.
Helm prepared a farm lease for the 2007 crop season which was signed
by the parties in November 2006. The lease provided that Four Aces would pay
Peck $195 per acre for 689.5 acres, with payment of $67,226.25 due on March 1,
2007, and $67,226.25 due on December 1, 2007. The lease contained only two
additional terms: that Four Aces would pay $0.10 per bushel for rent of storage
bins (and would be responsible for electricity and propane associated with the
1
“Poultry litter” includes poultry feces and bedding. Farmers use the poultry litter “as
fertilizer on their fields, and often sell or barter it to others.” Att’y Gen. of Oklahoma v.
Tyson Foods, Inc., 565 F.3d 769, 774 (10th Cir. 2009).
3
use of the bins), and that Peck would provide “3 ton of chicken litter at the rate of
$20 per ton” to be paid for by Four Aces.2
Four Aces proceeded to farm the land. During the summer of 2007, when
it appeared it would be a very good crop year with rising prices, Kennett talked to
Helm. Under the circumstances, it was thought Peck would “be expecting
more—more money.” The two discussed how to keep Peck satisfied so that
Four Aces could continue renting the farm. They discussed paying Peck a
bonus—one that would satisfy Peck but still maintain a profit for Four Aces. Four
Aces paid the 2007 rent pursuant to the lease terms. Helm testified that at some
point he told Peck he would be paid some type of bonus. In September 2008,
after the 2007 harvest had been sold, Four Aces paid Peck a “bonus” of
$61,251.72, and Helm presented Peck with a detailed accounting showing how
he had calculated this extra payment. Specifically, Helm reached the amount by
taking half of the “Shared Income” (gross income minus “Shared Expenses”),
reduced by the rental payments Four Aces had already made to Peck. Helm
later testified he chose the method of calculation to be “fair to both of us” in an
effort to “help to continue things for ’09 and beyond to maintain good relations” so
that Peck would continue to lease the farm to Four Aces. Peck maintained the
payment and method of calculation were in accordance with their “50-50
agreement.”
Four Aces continued renting Peck’s land. In November 2007, the parties
signed a written lease for the 2008 crop year, which was identical to the 2007
2
The lease also contained a handwritten provision that “this contract is void as of March
1, 2008.”
4
lease except for an increase in the rent amount to $200 per acre and omission of
the chicken litter provision. As it had done the previous year, after the 2008 crop
was marketed, Four Aces presented Peck with an additional payment than that
required by the written lease—this time in the amount of $27,497.05. Again,
Helm gave Peck a detailed accounting showing how he calculated the extra
payment, using the same method as he had for the 2007 payment. Helm later
testified he made the additional payment to Peck in order “to incentivize, to keep
continue renting the farm and maintain good relations.” In contrast, Peck testified
the parties continued to have an oral agreement that required Four Aces to share
profits with him.
The 2009 crop year unfolded similarly. In December 2008, the parties
signed a written lease for the 2009 crop year, which was identical to the 2008
lease but for an increase in the bin rental rate to $0.16 per bushel. In the fall of
2010, Four Aces again presented a summary of the profitability of the 2009 crop
year. This time, however, the summary showed that the cash rent Four Aces
paid to Peck exceeded the profits from the farm, and Four Aces made no
additional payment for the 2009 crop year. Peck later testified the rent required
by the lease only represented a minimum and that the oral agreement for profit
sharing continued to exist.
The parties did not enter into a new written lease for the 2010 and 2011
crop years. Four Aces continued to rent and farm Peck’s property. Peck later
testified that the 2009 lease was “carr[ied] over” and continued in effect through
the 2010 and 2011 crop years.
5
The parties’ relationship began to sour in 2011 after a disagreement arose
when a Four Aces employee loaded 2010 grain from Peck’s farm into a trailer
partially full with Four Aces’s grain. Peck felt Four Aces was “cheating” him by
commingling the grain. Helm agreed the employee’s actions were improper.
The incident forced Four Aces to estimate the amount of grain in the load that
came from Peck’s farm.
While wintering in Florida in early 2011, Peck fell ill, which prevented him
from farming 61.7 acres owned by his wife, Beverly, as he had in prior years.
Peck contacted Helm seeking Four Aces’s assistance with Beverly’s land, and
Helm “said he would help out.” Peck later testified he had no kind of agreement
with Helm about the rent, while Helm testified they agreed Four Aces “would just
cash rent it . . . under the same lease agreement” it had with Peck.
In August 2011, Peck sent a “Notice” to Four Aces that the contract
regarding Peck’s land and Beverly’s land was “cancelled” for the 2012 crop year.
In the fall of 2011, as in prior years, Four Aces prepared a summary for
Peck showing the profitability of the 2010 crop year. Based on the calculation,
Four Aces offered to pay $19,218.14 to Peck. Peck refused to accept the
payment, later testifying that it was not “calculated proper, and it was not honest
per our agreement.” According to Helm, he later called Peck and offered him
more money in an effort to continue Four Aces’s status renting the farm, though
he could not recall the amount he offered.
On November 1, 2011, Peck sent Four Aces a letter instructing Four Aces
not to market any of Peck’s grain and stating, “I will notify you when I desire for
the grain to be sold.” Peck filed a Uniform Commercial Code (UCC) Financing
6
Statement covering “[a]ll crops grown upon” the property, establishing a landlord
lien.
Helm later testified the grain was not Peck’s (“It was [Four Aces’s] grain”),
so Four Aces disregarded Peck’s letter and sold the grain from the farm. A
disagreement arose as Four Aces was removing the grain stored on Peck’s
property, eventually involving law enforcement and the parties’ attorneys. Helm
presented the sheriff with a written lease for the 2011 crop year; Helm had
signed Peck’s name on the lease, but later testified Peck had “directed” him to do
so.
In a November 2011 letter to Peck, Four Aces (through its attorney)
detailed what it represented as “payment in full” for the outstanding amounts
Four Aces owed Peck under the written lease, and did not mention a crop share
agreement between the parties. The letter included four checks to Peck from
Four Aces: $68,950 for “2011 land rent/2nd half”; $9272 for “storage 2010”;
$10,817.60 for “2011 storage”; and $12,340 for “2011 cash rent” for Beverly’s
61.7 acres. In the letter, Four Aces alleged Peck violated the lease by chopping
and chiseling the corn stalks, thereby retaking possession of the properties early
and preventing Four Aces from harvesting the corn stover 3 when the lease
granted Four Aces possession of the properties until March 1, 2012. In closing,
the letter included a formal demand for release of the UCC Financing Statement
3
Corn stover is defined as “corn stalks, leaves, and cobs remaining above ground on the
field after the harvest of corn kernels.” Jack W. Leverenz, Corn Flakes Aren’t Just for
Kellog’s, A Look at Corn Stover and Its Effect on Leasing in the Landlord Tenant
Relationship, 17 Drake J. Agric. L. 511 (2012).
7
filed by Peck, asserting that Four Aces “has performed all obligations under the
Farm Lease between the parties.”
Peck’s attorney returned the checks to Four Aces’s attorney with a letter
stating:
For the years since 2007, the agreement has been that Four Aces
Farms would lease Mr. Peck’s land on a 50/50 crop share basis
with a minimum of $200 per acre. It is also our position that
Beverly Peck leased her land to Four Aces Farms, Inc. for the 2011
crop year on the same terms as the existing lease between Ron
Peck and Four Aces Farms.[4]
Knowing it would not be renting Peck’s farm any further, Four Aces did not
offer any additional or bonus payments for the 2011 crop year. At the request of
Peck’s attorney, Four Aces created a summary of profitability for the 2011 year,
which included calculations for Beverly’s 61.7 acres.
In March 2012, Peck filed a petition for declaratory judgment and for
accounting against Four Aces.5 Peck alleged the parties’ lease agreement was
in fact a “50/50 crop share lease” that also required Four Aces to pay the
minimum amount stated on the written lease. Peck claimed the written leases
did not represent the full agreement between the parties. Peck further alleged
Four Aces’s year-end summaries incorrectly incorporated crop sales from other
Four Aces farms when calculating prices received for Peck’s crops. Finally, Peck
claimed Four Aces did not lease the additional 61.7 acres, rather Four Aces
merely performed the farm work for him. Peck requested the district court
declare, among other things, that the leases “required that [Four Aces] pay a
4
The letter further stated it was not the full statement of Peck’s position and that the
purpose of the letter was to return the checks.
5
Peck also named Helm, personally, as a defendant, but Helm was dismissed as a
defendant on June 9, 2014, leaving Four Aces as the sole defendant.
8
minimum rent based on cash and rent based on a 50/50 crop share”; a full
accounting in order to determine the proper net income for each year; a judgment
for the difference between that paid and owed based on this new accounting; a
declaration that Peck was entitled to receive the 2011 crop from Beverly’s 61.7
acres from Four Aces, and a declaration that Four Aces was entitled to
compensation for planting, spraying, and harvesting the crop on Beverly’s land at
ordinary and customary custom rates.
Four Aces filed an answer and counterclaim, denying the existence of a
50/50 crop share agreement. Four Aces further claimed it leased Beverly’s 61.7
acres on terms identical to the written leases between Four Aces and Peck. In a
counterclaim, Four Aces alleged that in 2011, Peck prevented Four Aces from
harvesting corn stalks from the properties in violation of Iowa Code section
562.5A (2011), and sought an order requiring Peck to reimburse Four Aces for
the lost value of the unharvested corn stover. Other counterclaims and defenses
are not at issue on appeal.
In August 2014, following a one-day bench trial, the district court entered a
declaratory ruling and judgment order in favor of Peck, concluding the parties
had an oral crop share agreement supplementing the written farm lease:
The parties’ division of farm profits originated during their initial
associations as landlord and tenant for the 2007 crop year, and
was sustained throughout their lease relationship. The meeting of
their minds on sharing the farm’s production potential arose in oral
discussions Peck had with Helm with the aid of Kennett, as the
2007 crop was growing. Both parties realized they had a written
lease in place for Four Aces to pay Peck $195 per acre in two
installments; nonetheless, with the March 1st installment already
paid, Peck and Helm refined their deal. It was in the summer of
2007 when the crop was looking very good, that they agreed to
incorporate a sharing of profits into the agreement.
9
In reaching this conclusion, the district court considered the testimony of Peck
and Helm, as well as Kennett.6 The court found the previous course of dealings
between the parties—especially the methodical nature with which the annual
additional payments and summaries were made from Four Aces to Peck—to be
significant in reaching its conclusion.
The court determined Four Aces owed to Peck $19,218.14 for the 2010
crop share; $9,272.00 for 2010-11 bin rent; $68,950.00 for the December 2011
cash rent installment; $94,090.74 for 2011 crop share; $10,817.60 for 2011-12
bin rent; and $12,400.00 for 2011 cash rent for Beverly’s land—a total of
$214,748.48.
The court found in Four Aces’s favor on its corn stover counterclaim,
stating that by prematurely chiseling the corn stalks Peck denied Four Aces its
leasehold right to recover the “full measure of the crop” pursuant to Iowa Code
section 562.5A. The parties stipulated the value of the corn stover Four Aces
was prevented from harvesting was $20,429.00. The court awarded Four Aces
half of this amount—$10,214.50—finding Peck was entitled to half of the value of
the stover. The court also credited Four Aces for $461.90, half the cost of a bin
repair made by Four Aces.
After off-setting the award to Four Aces on its counterclaim, the district
court entered judgment in Peck’s favor in the amount of $204,072.08. In
6
It is noted the district court reached its conclusions based upon a preponderance of
evidence standard.
10
addition, the court ordered Four Aces to pay interest at a rate of five percent7
from March 28, 2012, the date on which Peck filed the suit.8
Four Aces appeals.
II. Scope and Standards of Review
The standard of review for a declaratory judgment varies by how the case
was tried. See Owens v. Brownlie, 610 N.W.2d 860, 865 (Iowa 2000). The
parties agree the district court tried this case in equity. We conduct a de novo
review of cases tried in equity. Iowa R. App. P. 6.907; Owens, 610 N.W.2d at
865. We give weight to factual findings made by the district court, especially
regarding the credibility of witnesses, but we are not bound by them. Owens,
610 N.W.2d at 685.
III. Parol Evidence
Four Aces contends the district court “improperly considered parol
evidence to modify the terms of an existing written contract.” Four Aces claims
the parties’ written farm lease “set forth all terms needed to carry out
enforcement of the agreements” and parol evidence of “[t]he alleged oral
agreement” could not be used to vary or add to those terms.
A. Error Preservation. Peck contends this issue was not preserved for
review. As Peck points out, Four Aces never objected at trial to the use of parol
evidence and the district court never ruled on the issue.
7
The district court cited to Iowa Code section 535.2(1)(b) in imposing the five-percent
rate.
8
The date set by the district court from which the interest runs is not challenged by
either party.
11
Four Aces counters that its submission of a pretrial brief—which included
a claim that the court was precluded from considering parol evidence—preserves
the issue for appellate review despite the absence of a ruling by the trial court on
the issue. Although the parol evidence rule is a substantive rule of law, standard
error preservation rules regarding the admission of evidence apply to parol
evidence issues. See Top of Iowa Coop. v. Sime Farms, Inc., 608 N.W.2d 454,
470 (Iowa 2000). “It is a fundamental doctrine of appellate review that issues
must ordinarily be both raised and decided by the district court before we will
decide them on appeal.” Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002).
This case was tried in equity, and in such cases “‘the trial judge, while
noting objections, may not exclude offered testimony’” in order to “preserve a
complete record of the evidence for the trial and the appellate courts, leaving to
them the rejection of inadmissible testimony in deciding the issues.” See O’Dell
v. O’Dell, 26 N.W.2d 401, 416-17 (Iowa 1947) (quoting Rankin v. Schiereck, 147
N.W. 180, 182 (Iowa 1914)). Accordingly, at issue is not the admission of the
parol evidence challenged by Four Aces, but the court’s consideration of that
evidence.
Throughout the one-day bench trial, Four Aces lodged no objections to
evidence that arguably implicated the parol evidence rule. The pretrial brief that
purports to raise the issue of parol evidence did not become a part of the record,
though its existence is acknowledged by the parties.
Four Aces claims that by considering the parol evidence when deciding
the case, the district court implicitly ruled on the issue and that this, coupled with
its argument in its pretrial brief, satisfies the preservation requirements. The
12
district court’s ruling refers to an oral agreement and Helm’s calculations and
summaries as being evidence of an oral contract between the parties. The
inference could be drawn that the district court ruled against Four Aces by using
the evidence in reaching its ruling. But without the benefit of objections at trial
and Four Aces’s pretrial brief, this court cannot be sure which pieces of evidence
were contested by Four Aces. The two requirements for preservation, that the
issue be both raised and decided by the court, have not been convincingly
established. See Meier, 641 N.W.2d at 537.
B. Consideration of Parol Evidence. Bypassing this error preservation
concern, see State v. Taylor, 596 N.W.2d 55, 56 (Iowa 1999) (bypassing error
preservation problem and proceeding to the merits of the appeal), we do not
conclude the district court erred in considering extrinsic evidence. “When an
agreement is fully integrated, the parol-evidence rule forbids the use of extrinsic
evidence introduced solely to vary, add to, or subtract from the agreement.”
C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65, 85 (Iowa 2011). An
agreement is fully integrated “when the parties adopt a writing or writings as the
final and complete expression of their agreement.” Id. The presence of an
integration clause, while considered, is only one factor used in determining if the
contract is integrated. See id. Extrinsic evidence may be used to consider if the
written contract is in fact fully integrated “despite the absence of . . . ambiguity on
the face of the document.” In re Eickman Estate, 291 N.W.2d 308, 312 (Iowa
1980).
Once it is established that an agreement is not fully expressed in writing,
extrinsic evidence may be used to find the entire contract. See Sol Popofsky Co.
13
v. Wearmouth, 248 N.W. 358, 360 (Iowa 1933); see also Cargill, Inc. v.
Fickbohm, 252 N.W.2d 739, 741 (Iowa 1977) (allowing oral evidence to show the
delivery date term when that field on a form contract had been left blank). “A
contract may . . . be partially written and partially oral.” Cargill, Inc., 252 N.W.2d
at 741. As expressed in Sol Popofsky Co.:
[W]here the entire agreement is not fully expressed in the writing,
and where part of the agreement is oral and part in writing, parol
evidence may be introduced to show the entire contract . . . . If the
parol part concerns a matter not covered by the writing, then, the
written and parol parts being harmonious, the parol part may be
shown along with the written.
248 N.W. at 360. The caveat is that the “parol terms may not directly contradict a
clear term of the written agreement.” Id.Four Aces argues that the written lease captures the entire agreement
between the parties and thus prevents the consideration of parol evidence. The
language Four Aces relies on reads: “Tenant agrees to pay the owner $200 per
acre” and “[t]he land rent is . . . $137,900.”
At the outset, we observe the lease lacks an integration clause, which is
one factor to consider, although it is not dispositive. See C & J Vantage, 795
N.W.2d at 85. Describing the written lease as skeletal would be generous
considering the major bones it is missing. There is no legal description of the
leased parcels.9 The written lease does not describe the type of crops to be
grown and, in fact, did not even require Four Aces to farm the land. Nor did the
written lease preclude Four Aces from using the land for non-farming purposes.
9
The lease only indicates the 690 acres of leased parcels were located somewhere
within four square miles of land. The parcels were located in four separate sections of
land. A section is defined as “[a] piece of land containing 640 acres, or one square
mile.” Black’s Law Dictionary 1473 (9th ed. 2009).
14
Four Aces could have used the land to stage a Wadena-like rock festival, or it
could have operated a salvage yard on the property. Other terms typically found
in a farm lease are absent. The absence of these significant terms supports the
court’s finding that the lease was not the full extent of the parties’ agreement—
the parties obviously knew the location of the leased land and that it was to be
used for farming, but simply did not memorialize these terms in the written lease.
The “totality of the evidence” is to be considered when determining if a
written agreement is fully integrated. See id. The surrounding circumstances
and vagueness of the lease persuasively point toward a non-fully integrated
agreement between the parties, which allows for the consideration of parol
evidence to show the unwritten portion of that agreement. See Sol Popofsky
Co., 248 N.W. at 360. The district court properly considered the parol evidence,
so we next turn to the question of whether or not Peck established that there was
a 50/50 oral crop share agreement.
IV. Oral Agreement
Peck argues that “[i]n order to give any real meaning to the written
contract entered into between the parties, it would be necessary for the parties to
also have an oral contract,” and “the course of conduct between the parties over
the 2007 through the 2011 farm years [evidenced] the parties’ oral agreement.”
The parties’ written agreement,10 entitled “Farm Lease,” provides in full:
This lease is made between Ron Peck, owner and Four Aces
Farms, tenant. This lease will be from March 1, 2009 to March 1,
2010. The parcels of land are approximately 689.5 acres. The
10
Minor changes were made to the leases for the 2007, 2008, and 2009 crop years. For
our purposes, we have used the 2009/2010 lease because that was the lease renewed
due to lack of termination and in effect at the time the dispute between the parties arose.
15
parcels are located in Section 29 of Scott Township, Section 34 of
Pleasant and Sections 5 & 6 of Jackson Township of Poweshiek
County. Tenant agrees to pay the owner $200 per acre.
The land rent is $200 x 689.5 acres = $137,900.
The tenant will pay $68950 on March 1, 2009.
The tenant will pay $68950 on December 1, 2009.
The tenant will pay bin rent at 15 cents per bushel. The
tenant will also pay electricity and propane used.
The written agreement includes no reference to any agreement between
the parties to share crop profits or other revenues or expenses. But that does
not preclude an oral agreement co-existing with the written agreement. This type
of relationship has been acknowledged by the supreme court:
An examination of our lease cases wherein oral evidence was
offered to show a collateral agreement shows where the parol
evidence is of an agreement which did not vary or affect any of the
terms of the written lease, but was beyond and independent of it, it
was admissible. In [Witthauer v. Wheeler, 150 N.W. 46, 47-48
(Iowa 1914),] plaintiff leased from defendant, in writing, for two
years a 2400 acre ranch only 200 acres of which was tillable, as a
farm and stock ranch. The crop rent was fixed in the writing but no
mention was made as to any agreement between the parties jointly
conducting the business of stock raising, the parties to share
equally in the increase of said stock.
Gordon v. Witthauer, 138 N.W.2d 918, 920 (Iowa 1965). And as we observed in
the preceding section, this is precisely the type of situation where extrinsic
evidence may be admitted to show the complete duties and obligations of the
parties. See Witthauer, 150 N.W. at 47-48 (affirming admission of evidence of
“conversations between the parties prior to the execution of the written lease [to
rent land to use as a farm and stock ranch], which as claimed resulted in an
agreement between them that appellant was to stock the ranch with cattle which
were to be cared for by the appellee, and the increase of the same was to be
divided between them”); see also Parriott v. Levis, 195 N.W. 578, 579 (Iowa
16
1923) (“[T]here may be at the same time two contracts coexistent, one of which
is in writing and complete in itself, and the other of which is in parol and complete
in itself. . . . In such case the written contract is not altered, varied, or changed
by proof of the coexistent oral contract. The writing embodies the written
contract, and the oral evidence established the parol contract. Even in such a
case, evidence of a contemporaneous parol or collateral agreement is only
available when it refers to a matter on which the writing is silent, and which is in
no manner inconsistent with the terms of the written instrument.”).
That having been said, it is Peck’s burden to prove there was an oral
agreement for a 50/50 crop share. Hawkeye Land. Co. v. Iowa Power & Light
Co., 497 N.W.2d 480, 486 (Iowa 1993) (“A party who seeks recovery on a
contract has the burden to prove the existence of the contract.”). “[P]roof of a
claimed oral contract must be clear, satisfactory and convincing. A mere
preponderance of the evidence is not enough.” Ehlinger v. Ehlinger, 111 N.W.2d
656, 659 (Iowa 1961). For evidence to be clear and convincing, it is necessary
“that there be no serious or substantial doubt about the correctness of the
conclusions drawn from it.” Raim v. Stancel, 339 N.W.2d 621, 624 (Iowa Ct.
App. 1983). Although only a reasonable certainty an oral contract existed need
be shown, the terms must be sufficiently definite to determine with certainty the
duties and obligations of each party. Netteland v. Farm Bureau Life Ins. Co., 510
N.W.2d 162, 165 (Iowa Ct. App. 1993). “For a contract to be valid, the parties
must express mutual assent to the terms of the contract.” Royal Indem. Co. v.
Factory Mut. Ins. Co., 786 N.W.2d 839, 846 (Iowa 2010).
17
The written lease provides for cash rent only. To assure good relations
and the ability to continue to farm the land, in 2008 Four Acres paid a bonus to
Peck in connection with the 2007 crop year. The initial bonus was calculated by
Helm in a format reflecting shared income and shared expenses much akin to a
50/50 crop share less the cash rent previously paid. Before paying the 2008
bonus to Peck, Helm discussed the use of a bonus with farm consultant Kennett.
Bonus structures were familiar to Kennett, and he explained bonuses were paid
by tenants to landlords because the changing grain markets caused negotiated
cash rents to go “out of whack.” The use of bonuses that were not contractually
required also did not violate any rules of the governmental agency, Farm Service
Agency (FSA). Four Acres also similarly calculated and paid a bonus in 2009. In
2010, because of reduced profits, no bonus was paid. The landlord-tenant
relationship then began to sour.
Unfortunately, the calculation and payment of bonuses apparently left
Peck with the impression that he was somehow entitled to a 50/50 sharing of
profits—notwithstanding the unambiguous terms of the parties’ lease. It seems
highly improbable that Helm would have agreed to Peck’s version of the contract
terms because the contract would have run afoul of the FSA rules. Helm also
had a logical reason for paying the bonuses—retaining the ability to farm the land
for future years. Moreover, Peck presented no evidence of any conversations
with Helm suggesting the parties agreed to a crop share arrangement with or
without cash rent. At most, Peck testified, “It was a 50-50 agreement, which
we’ve always done.” He referenced no specific conversations with Helm. On the
18
other hand, both Helm and Kennett testified about their conversation concerning
providing a discretionary bonus to Peck.
Other evidence also supports the position of Four Acres. The written
lease required full payment of bin rent and chicken litter by the tenant, which is
inconsistent with a crop share arrangement where expenses are shared. Four
Acres or Helm maintained the crop insurance on all the acres rented, and FSA
forms reflected that Four Acres was the sole producer/operator. Further, Peck
was not involved in any decision making, except to perhaps share his advice or
predictions of the grain markets.11
Upon our de novo review of the record, we conclude Peck has not
established by clear, satisfactory and convincing proof that an oral 50/50 crop
share agreement was ever reached between these parties pertaining to Peck’s
land or Beverly’s land. There was no meeting of the minds concerning a crop
sharing arrangement. Accordingly, the district court’s declaratory ruling and
judgment should be modified to strike the award to Peck of $19,218.14 for 2010
crop share and $94,090.74 for 2011 crop share. Thus, Peck is entitled to recover
11
One commentator has acknowledged the existence of flexible cash rent arrangements
in stating, “Flexible or adjustable cash leases set the rent based on the crop yield, the
crop price, or a combination of these attributes.” Edward Cox, A Lease-Based Approach
to Sustainable Farming, Part II: Farm Tenancy Trends and the Outlook for Sustainability
on Rented Land, 16 Drake J. Agric. L. 5, 23 (Spring 2011). But in crop share
arrangements,
[t]ypically landowners contribute a share of the farm inputs and are more
involved in land use decision making. This added involvement and risk
can affect social security payments, taxes, estate planning, and the
distribution of farm program payments. Simply stated, landowners would
be more likely to be viewed as self-employed and more likely to be
eligible for a share of any farm program payments.
Id. Here the parties never committed to any formality of the bonus arrangement.
Rather, it was left to the discretion of Four Acres. Further the only sharing Peck wanted
to participate in was a share of the profits.
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$101,439.60 from Four Aces for 2020-11 bin rent ($9,272.00), 2011 cash rent
installment ($68,950), 2011-12 bin rent ($10,817.60), and 2011 cash rent for
Beverly’s land ($12,400).
V. Corn Stover
As the district court found, “Peck took over during the fall of 2011 and had
the corn stalks chiseled in for the 2012 crop preparations. That unilateral act
before the lease end, denied the 2011 tenant [Four Aces] opportunity to harvest
stover from 2011 corn production.” In view of the crop-share agreement it found,
the court awarded Four Aces one-half the value of the stover. Four Aces
contends the district court “improperly awarded only one-half of the crop stover to
Four Aces,” contending that it had the right to collect “the full stipulated value of
the stover: $20,429.”
As set forth above, the parties’ agreement did not include a 50/50 profit
sharing arrangement. Pursuant to Iowa Code section 562.5A, in the absence of
a written agreement to the contrary, “a farm tenant may take any part of the
aboveground part of a plant associated with a crop . . . until the farm tenancy
terminates.” This court recently interpreted this language as entitling a tenant to
damages for the value of the destroyed corn stover when the landlord entered
the property before the termination of the lease to perform fall tillage, preventing
harvest of the corn stover by the tenant. See Slach v. Heick, No. 14-0539, 2015
WL 1546445, at *4, 18 (Iowa Ct. App. Apr. 8, 2015). Section 562.5A applies to
leases that renew for lack of notice of termination after the provision’s effective
date of July 1, 2010. See id. at *12, 15. Accordingly, section 562.5A applies to
the parties’ lease for the 2011 crop year, as it was a renewal of the prior year’s
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lease due to lack of termination on September 1, 2010. See Iowa Code
§§ 562.6, 562.7. Four Aces was therefore entitled to the full value of the stover,
not half as found by the district court. Accordingly, the district court’s declaratory
ruling should be modified to credit Four Aces in the amount of $20,429, the full
value of the crop stover from the 2011 crop.
VI. Interest Awarded on Amounts Tendered
Four Aces claims the district court “improperly awarded Peck interest on
amounts that Four Aces had previously tendered and Peck had rejected.” Four
Aces contends it is not obligated for interest beyond the date of tender.
The district court ordered that the judgment of $204,072.08 “shall draw
interest at the annual rate of five percent, factored from March 28, 2012 [the day
Peck’s lawsuit was filed].” Four Aces contends its November 21, 2011 letter and
enclosed checks totaling $101,379.60 was an unconditional tender to Peck,
rendering the district court’s award of interest on these amounts improper. A
bona fide tender precludes the accrual of further interest on amounts due. See
In re Estate of Zach, 131 N.W.2d 484, 486-87 (Iowa 1964). But the tender must
be “absolute and unconditional” to be effective. Decorah State Bank v. Zidlicky,
426 N.W.2d 388, 391 (Iowa 1988).
Peck counters that language of Four Aces’s letter indicating the offered
checks represented “payment in full” for the 2011 farm rent made the tender
conditional—acceptance of which would form an accord and satisfaction
discharging Peck’s claims against Four Aces.
To constitute an accord and satisfaction . . . all that is
necessary is that the money should be tendered in satisfaction of
the claim; that the tender be accompanied with such acts and
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declarations as amount to a condition that, if the money is taken, it
is accepted in satisfaction. The conditions under which the tender
is made, and the conduct of the party at the time of the tender,
however, must be such that the party to whom it is tendered is
given to understand that, if he takes it, he takes it in satisfaction of
his claim, so far as the other party is concerned. He must either
refuse or accept it. If he accepts it, he is bound. If he takes it, his
claim is canceled.
Shahan v. Bayer Vehicle Co., 162 N.W. 221, 223 (Iowa 1917).
For the acceptance of the tender to be considered an accord and
satisfaction, there must have been a genuine dispute concerning the amount
due. See Olson v. Wilson & Co., 58 N.W.2d 381, 386 (Iowa 1953). The
November 2011 letter individually listed the amounts enclosed for the 2010-2011
and 2011-2012 bin rents. There was no dispute at the time as to the amount of
bin rent due to Peck. These amounts were provided on separate checks and
Peck was free to accept them without the risk of discharging his claim.
Therefore, the tender of $20,089.60 for bin rent was unconditional and the award
of interest on this amount was improper. See Zidlicky, 426 N.W.2d at 391.
The parties did have a dispute, however, over the nature of their land
rental agreement. Peck had already rejected the 2010 “bonus” payment offered
by Four Aces on the basis that it was not properly calculated. Peck’s letter
instructing Four Aces not to market any of Peck’s grain was at direct odds with
Four Aces’s contention that the leases had no crop share component.
The existence of an accord and satisfaction is generally a question for the
trier of fact. See Perin v. Cathcart, 89 N.W. 12, 13 (Iowa 1902). We conclude a
reasonable trier of fact could have found the letter and accompanying
payments—had they been accepted—constituted an accord between the parties
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discharging Peck’s claim against Four Aces. See Seidler v. Vaughn Oil Co., 468
N.W.2d 474, 478 (Iowa 1991) (remanding to determine if plaintiff “knew or should
have known” that accepting a check with “Full, Final Settlement for Damages”
written on it was intended as a release of claims against the defendant); Perin,
89 N.W. at 13 (stating an accord and satisfaction “need not be express, but may
be implied from the circumstances”). The tender of payment for the rental
amounts, therefore, was conditional and did not preclude an award of interest
See Zidlicky, 426 N.W.2d at 391. We therefore affirm the district court on this
issue of awarding interest.
We determined above that the rental amounts Four Aces owed to Peck
totaled $101,439.60 and that Four Aces was entitled to a set-off of $20,429 for
the stover. The parties do not challenge the district court’s set-off of $461.90 to
Four Aces for a bin motor repair. Reducing the $101,439.60 by the two set-offs,
Peck is entitled to $80,548.70. The district court’s declaratory ruling and
judgment should therefore be modified to reduce the amount subject to the
interest award to $80,548.70.
VII. Conclusion
In accordance with the above opinion, we modify the district court’s
declaratory ruling and judgment as follows: (a) the awards to Peck of $19,218.14
for 2010 crop share and $94,090.74 for 2011 crop share are deleted, (b) the
amount of set-off to Four Aces for the crop stover from the 2011 crop is
increased to $20,429, and (c) the amount subject to interest is reduced to
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$80,548.70. We affirm the district court’s declaratory ruling and judgment in all
other respects. Costs of the appeal are taxed to Peck.
AFFIRMED AS MODIFIED.