Charles E. McBeth and Janet M. McBeth, Individually and as Trustees of the Charles E. McBeth and Janet M. McBeth Revocable Trust, dated September 13, 2012 v. Carolyn McBeth ( 2020 )

IN THE COURT OF APPEALS OF IOWA
No. 19-0600
Filed September 2, 2020
CHARLES E. McBETH and JANET M. McBETH, Individually and as Trustees
of the CHARLES E. McBETH & JANET M. McBETH REVOCABLE TRUST,
dated September 13, 2012;,
Plaintiffs-Appellees,
vs.
CAROLYN McBETH,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Wapello County, Shawn R. Showers,
Judge.
Carolyn McBeth appeals the district court’s ruling for Charles and Janet
McBeth on their breach-of-contract claim, and Charles and Janet McBeth cross-
appeal the adverse rulings in a replevin action. AFFIRMED ON APPEAL;
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED ON CROSS-
APPEAL.
Matthew J. Adam and Chad D. Brakhahn of Simmons Perrine Moyer
Bergman PLC, Cedar Rapids, for appellant.
Dustin D. Hite and Randy S. DeGeest of Heslinga, Dixon & Hite, Oskaloosa,
for appellees.
Considered by Bower, C.J., and Doyle and Schumacher, JJ.
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DOYLE, Judge.
The parties involved in a dispute over an oral farm lease and possession of
farm equipment appeal and cross-appeal from the district court order entering
judgment for the plaintiffs on their breach-of-contract claim and denying a replevin
claim.
I. Background Facts and Proceedings.
Charles and Janet McBeth own land in Wapello County. They allowed their
son, Stephen, to farm their land free of charge, and Charles provided Stephen his
farm equipment for use. When Stephen died in January 2012, his wife, Carolyn,
offered to pay Charles and Janet rent to continue to farm the land. But because
Carolyn was in debt, Charles refused to accept any payment from her in 2012. In
2013, he asked Carolyn to pay him $60,000 to farm the land, an amount that would
cover property tax.
The dispute began over the amount of rent due for the 2014 crop year.
Charles testified that he believed Carolyn was out of debt by the end of 2013. So
when Carolyn paid rent for the 2013 crop year, Charles asked that she pay $275
per acre in 2014, which is the rate he and Janet charged their other tenants.
Carolyn claims she believed the rent for 2014 was $60,000, the same amount as
the year before, and she sent a check for that amount in December 2014. Charles
and Janet voided and returned the check with a letter stating that their accountant
told them they “should charge a reasonable amount of rent” or they would be
subject to gift tax. The letter also states, “We thought $275 per acre would be fair
as that is the amount that [other tenants] were paying.”
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In March 2015, Carolyn tendered a check for $393,250, an amount based
on use of an estimated 1430 acres. Charles believed the check was for the 2014
rent Carolyn owed. But Carolyn claims she was paying upfront for the 2015 rent,
testifying that she told Charles, “This is for 2015. 2014 is done. I’ve already done
my taxes.” According to Carolyn, Charles agreed.
On March 1, 2016, Carolyn tendered a check for $388,756.50 because she
learned she was farming only 1413.66 acres. Carolyn claims the March 2016
check was for 2016 rent. But Charles, believing the check was for the 2015 crop
year, wrote “YR 2015” in the memo line.
Carolyn terminated the lease after the 2016 crop year. She made no other
payments to Charles and Janet.
In March 2018, Charles and Janet1 petitioned alleging Carolyn breached
the terms of the lease by failing to pay the full amount of rent due. Charles also
petitioned in replevin, seeking the return of his farm equipment from Carolyn.
Carolyn denied she breached the oral contract and filed a counterclaim, alleging
Charles and Janet sold a combine that belonged to her. The district court
consolidated the cases and held a bench trial in March 2019. In its ruling, the court
found the parties entered an oral lease agreement in 2012. It found rent was $0
for 2012 and the parties amended the agreement to provide a total rent payment
of $60,000 for 2013. The court also found that the parties renegotiated the terms
of the lease in March 2015 for payment of $275 per acre and rejected Carolyn’s
claim that her $393,350 payment in March 2015 was advance payment of the 2015
1Charles and Janet sued in their individual capacities, as well as in their capacities
as Trustees of the Charles E. McBeth & Janet May McBeth Revocable Trust.
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rent as “not credible.” It instead found that the March 2015 check was tendered to
pay rent for the 2014 crop year. The court also found that the $388,756.50 Carolyn
paid in March 2016 was rent for the 2015 crop year. Because Carolyn never paid
rent for 2016 crop year, the court determined Charles and Janet were entitled to
$388,756.502 in damages.
As for the replevin action, the court ordered Carolyn to return to Charles
immediately a tractor and bulldozer that Carolyn agreed Charles owned. But the
court found the remaining farm equipment belonged to Carolyn because it was
listed in the inventory of Stephen’s estate. The court also found that a combine
listed in the estate inventory and valued at $45,000 belonged to Carolyn. Because
Charles and Janet sold the combine, the court credited Carolyn $45,000 against
the judgment on the breach-of-contract claim and entered judgment for Charles
and Janet in the amount of $343,756.50. Carolyn appealed the court’s ruling on
the breach-of-contract claim, and Charles and Janet cross-appealed the court’s
replevin ruling.3
II. Scope of Review.
The parties disagree on the standard of review. We review cases tried at
law for correction of errors at law, and we review cases tried in equity de novo.
See Iowa R. App. P. 6.907. Here, both actions were docketed as cases in equity,
but that alone does not control our review. See Horsfield Materials, Inc. v. City of
2 The original order misstated this amount as $288,756.50, but the court later
amended the order to the proper amount.
3 Although the number of exhibits in the appendix was not large, it would have
been helpful had the table of contents given a concise description for each exhibit
listed as required by Iowa Rule of Appellate Procedure 6.905(4)(c).
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Dyersville, 834 N.W.2d 444, 452 (Iowa 2013). Rather, whether the matter was
tried at law or in equity turns on the “essential character of a cause of action” and
the nature of relief sought. Quigley v. Wilson, 474 N.W.2d 277, 279 (Iowa Ct. App.
1991), aff’d, 474 N.W.2d 277 (Iowa 1991). And the nature of both actions is at law.
See id. (“Where the primary right of the plaintiff arises from nonperformance of a
contract, where the remedy is money, and where the damages are full and certain,
remedies are usually provided at law.”); see also Short v. Martin, 121 N.W.2d 154,
156 (Iowa 1963) (“Replevin is an action at law . . . .”). We review a case on appeal
in the same manner in which the trial court considered it. See Johnson v. Kaster,
637 N.W.2d 174, 177 (Iowa 2001); Ernst v. Johnson Cnty., 522 N.W.2d 599, 602
(Iowa 1994). When, as here, the trial court rules on objections at trial and issues
a ruling and enters judgment rather than a decree, the case is tried at law. See
Van Sloun v. Agans Bros., Inc., 778 N.W.2d 174, 179 (Iowa 2010). Because the
nature of the actions and how they were tried was at law, our review is for
correction of errors at law. See Iowa R. App. P. 6.907.
III. Breach of Contract.
Carolyn challenges the district court’s finding that she breached the oral
farm lease by failing to pay rent for the 2016 crop year. “A party who seeks
recovery on a contract has the burden to prove the existence of a contract.”
Hawkeye Land. Co. v. Iowa Power & Light Co., 497 N.W.2d 480, 486 (Iowa 1993).
Although a party need only show a reasonable certainty that an oral contract
existed, the terms of that contract must be definite enough to determine the duties
and obligations of each party with certainty. See Netteland v. Farm Bureau Life
Ins. Co., 510 N.W.2d 162, 165 (Iowa Ct. App. 1993). This requires proof by “clear,
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satisfactory and convincing” evidence. Ehlinger v. Ehlinger, 111 N.W.2d 656, 659
(Iowa 1961). Evidence is clear and convincing if “there be no serious or substantial
doubt about the correctness of the conclusion drawn from it.” Raim v. Stancel, 339
N.W.2d 621, 624 (Iowa Ct. App. 1983).
The district court found “that the parties had an oral agreement for cash rent
as of March 2015 for $275/acre.” Carolyn argues the court erred in finding that the
parties amended the farm lease in March 2015 and by applying that amendment
retroactively to increase the amount of rent due in 2014. She argues there can be
no valid agreement to retroactively amend the lease for the 2014 crop year
because such an amendment was unsupported by consideration. 4 Carolyn is
4 Charles and Janet argue that Carolyn failed to preserve this claim for appellate
review because Carolyn never raised a defense of lack of consideration in the
district court. Because a written and signed contract is presumed to be supported
by consideration, a party asserting lack of consideration as a defense bears the
burden of establishing the defense. See Iowa Code §§ 537A.2 (2018) (“All
contracts in writing, signed by the party to be bound or by the party’s authorized
agent or attorney, shall import a consideration.”), .3 (“The want or failure . . . of the
consideration of a written contract may be shown as a defense . . . .”); Margeson
v. Artis, 776 N.W.2d 652, 656 (Iowa 2009) (noting that because “we presume a
written and signed agreement is supported by consideration,” “a party asserting a
lack-of-consideration defense has the burden to establish the defense”); Beal v.
Milliron, 267 N.W. 83, 85 (Iowa 1936) (“[T]he presumption created by this statute
was sufficient to cast the burden upon the defendant to overcome the same.”).
This has long been the law. See Linder v. Lake, 6 Iowa 164, 167 (1858) (noting
that “by the statute (Code, section 975), all contracts in writing, signed by the party
to the bond, his agent or attorney, import a consideration, in the same manner as
sealed instruments did at the time of the adoption of the Code,” which is an
extension of an 1839 law providing any instrument under seal is deemed valid and
binding, which itself was an extension of the common law). But this dispute
involves an oral contract rather than one that is written and signed, so there is no
presumption of consideration for Carolyn to overcome. Rather, Charles and Janet
bore the burden of proving consideration as part of an enforceable contract, which
includes the element of consideration. See Margeson, 776 N.W.2d at 655 (“It is
fundamental that a valid contract must consist of an offer, acceptance, and
consideration.”); Taggart v. Drake Univ., 549 N.W.2d 796, 800 (Iowa 1996) (stating
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correct that the parties cannot modify the lease to increase the rent owed for the
2014 crop year after it concluded because such modification lacks consideration.
No consideration exists when the promisee has a preexisting duty to
perform because a promisor is already entitled to receive the promise
made by the promisee and the promisee has only made what
amounts to a gratuitous promise. We have specifically applied this
rule to preexisting contractual obligations when parties to an original
contract agree to modify that contract.
Margeson v. Artis, 776 N.W.2d 652, 656, 658 (Iowa 2009); see also Recker v.
Gustafson, 279 N.W.2d 744, 759 (Iowa 1979) (holding that “new consideration is
necessary to support a contract modification” and disavowing a line of cases with
language to the contrary after finding those cases “digressed from our previous
case law on the necessity of consideration to support a contract modification
without either sound reasoning or reconciliation of previous authority”); City of Des
Moines v. Horrabin, 215 N.W. 967, 969 (Iowa 1927) (holding that “the performance
of a valid contract is no consideration for an increase in the price agreed to be paid
therefor”); Runkle & Fouse v. Kettering, 102 N.W. 142, 142 (Iowa 1905) (“Merely
fulfilling an existing obligation would not supply a new consideration.”)
“Modification of an existing agreement which imposes new obligations on one of
the parties is unenforceable for lack of consideration unless it also imposes a new
obligation on the other party.” 17A C.J.S. Contracts § 571 (June 2020 update).
But clear and convincing evidence shows the parties agreed to new lease
terms before the 2014 crop year. Charles testified he asked Carolyn to pay the full
amount of rent when she paid the $60,000 she owed for the 2013 crop year. When
that the party bringing a breach-of-contract action bears the burden of proving the
existence of an enforceable contract).
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Carolyn paid only $60,000 the next year, instead of the agreed on amount of $275
per acre, Charles and Janet voided and returned Carolyn’s check. The letter
accompanying the voided check reiterated the lease modification, stating, “We
thought $275 per acre would be fair . . . .” And the parties’ conduct following the
2014 crop year confirms the lease was modified. Passehl Estate v. Passehl, 712
N.W.2d 408, 417 (Iowa 2006) (“Consent to the modification may be either express
or implied from acts and conduct.”). Clearly, Charles understood that Carolyn’s
rent payments in March 2015 and 2016 were being made for the previous year as
he wrote “YR 2015” on the March 2016 check. And that was in keeping with
Carolyn’s practice of paying the rent at the end of each crop year. The district
court found Carolyn’s claim that she paid a year’s worth of rent in advance of the
2015 and 2016 crop seasons “was not customary for farm leases” and “not
credible.” We are bound by this finding. See Van Sloun v, 778 N.W.2d at 182(“On appeal in a law action we are bound by such factual findings on the credibility
of witnesses.” (citation omitted)). And if Carolyn had only agreed to pay the rent
increase beginning in 2015 because, as she claims she told Charles, “2014 [wa]s
done” and she had “already done [her] taxes,” there is no explanation as to why
she never issued a new check for $60,000 to pay rent for the 2014 crop year after
Charles and Janet voided the first check. It is hard to believe that Charles and
Janet would have demanded the 2015 rent paid in advance of the 2015 crop
season without also demanding the rent Carolyn owed for the 2014 crop season.
The more credible explanation is that the March 2015 payment applied to the 2014
crop year to conform to an agreement the parties reached at the end of the 2013
crop year to increase the rent payment to $275 per acre.
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We affirm the finding that Charles and Janet are entitled to $388,756.50 in
damages on their breach-of-contract claim.
IV. Replevin Action.
We turn then to Charles’s cross-appeal of the replevin action. In a replevin
action, the court must determine which party is entitled to possession of property.
See Iowa Code § 643.17 (2018). The purpose is to restore possession of property
to the party entitled to possess it. See Roush v. Mahaska State Bank, 605 N.W.2d
6, 9 (Iowa 2000); (providing that judgment shall determine which party is entitled
to possess the property and designate the party’s right therein).
Charles’s replevin lists nine items of farm equipment to which he claims
ownership. Carolyn agreed that Charles was entitled to possession of two of those
items, a John Deere 4440 tractor and a 2007 Caterpillar D6G bulldozer, and the
court ordered their immediate return. This portion of the court’s order is not
contested on appeal and is affirmed. The remaining items in the petition had been
listed in the inventory of Stephen’s estate in 2012. On this basis, the court
determined that Carolyn was entitled to possession of those items and denied
Charles’s petition.
Charles challenges the district court’s determination that he is not entitled
to relief on his replevin claim. He argues the district court erred in relying on
inventory of Stephen’s estate in determining ownership and ignoring the evidence
showing Charles is the owner of the equipment. At trial, Charles introduced into
evidence a Titan Machinery customer equipment purchase order for the sale of
four items of farm equipment listed in his petition. The purchase order lists the
customer name as Charles McBeth and was signed and dated on March 19,
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2012—two months after Stephen died. Charles testified that two wagons listed in
his petition had belonged to Stephen but that Stephen traded them in to Titan
Machinery. On March 19, 2019, the same day that Charles completed the
purchase of other items of farm equipment, Charles made an agreement with Titan
Machinery to trade in five smaller wagons for the two larger wagons that Stephen
had owned. The purchase order showing the trade was also admitted into
evidence at trial. The final item of equipment listed in the petition is a grain drill,
which Charles testified he obtained in a trade with a farmer who needed a lighter
drill.
The only evidence Carolyn introduced as to ownership of the farm
equipment was the inventory of Stephen’s estate. But the inventory is not evidence
of ownership. See Estate of Randeris v. Randeris, 523 N.W.2d 600, 604 (Iowa Ct.
App. 1994) (“[A] hearing on a final report does not invoke the court’s jurisdiction to
actually adjudicate title to property.”); see also Davis v. Travelers Ins. Co., 196
N.W.2d 526, 529 (Iowa 1972) (“The probate court has jurisdiction to determine the
claim of property as between those interested in the estate but this authority goes
only to determination of their relative interests as derived from the estate, and not
to an interest claiming adversely thereto.”); In re Estate of Anders, 26 N.W.2d 67,
70-72 (Iowa 1947) (reviewing cases and concluding that probate is not the proper
forum in which to try an adverse claim of title). The uncontroverted evidence
presented by Charles at trial establishes his ownership in the farm equipment listed
in his petition. For this reason, we reverse the portion of the district court’s order
denying Charles’s replevin claim and remand to the district court to issue a writ of
replevin for the seven items listed in the petition and contested on appeal or an
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order in replevin entering judgment against Carolyn for the value of the equipment.
Since not contested on appeal, that portion of the court’s order ordering the return
to Charles of the John Deere 4440 tractor and the 2007 Caterpillar D6G bulldozer
is affirmed.
V. John Deere 9400 Combine.
Charles also challenges on cross-appeal the court’s finding for Carolyn on
her counterclaim over ownership of a John Deere 9400 combine, which Charles
and Janet sold. The court found that the combine’s listing in Stephen’s estate
inventory established Carolyn’s ownership and that she was entitled to damages
in the amount of the combine’s value of $45,000, and the court subtracted that
amount from the damages she owed for breach of contract. The evidence shows
otherwise. Charles testified he bought the combine in 2010 for $35,000 and sold
it in 2013. He introduced his tax depreciation schedule into evidence, which lists
the date the equipment was put in service as September 2010, its tax cost as
$35,000, its prior tax depreciation as $10,446.43, and its current tax depreciation
as $5261.48. The uncontroverted evidence shows Charles owned the combine.
We therefore reverse the portion of the court’s order finding for Carolyn on her
counterclaim and remove the $45,000 credit against the breach-of-contract
judgment.
AFFIRMED ON APPEAL; AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED ON CROSS-APPEAL.