Amended March 13, 2017 Russell L. Newhall v. Marcia Elaine Newhall Roll

IN THE SUPREME COURT OF IOWA
No. 14–1622
Filed December 23, 2016
Amended March 13, 2017
RUSSELL L. NEWHALL,
Appellee,
vs.
MARCIA ELAINE NEWHALL ROLL,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Butler County, Gregg R.
Rosenbladt, Judge.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT JUDGMENT AFFIRMED.
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.
2
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.
1Our decision in Roll v. Newhall, 888 N.W.2d 422 (Iowa 2016) involving the same
parties is also filed today. In that case, Marcia asserted Russell could not inherit under
their biological mother’s will because their biological aunt adopted him after the will
was executed but before the testator died.
2Although he has farmed the tillable portion of the Butler County tract since
1974, Russell’s primary enterprise at the time of trial was farming and raising cattle in
North Dakota.
3
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
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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
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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
3Likethe district court, the court of appeals found it would be inequitable to
divide the Butler County farm between the parties because doing so would decrease the
total value of the entire tract and present practical problems of access and fencing of
the hay and pasture ground.
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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
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§ 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 seeking a partition in kind has the burden to prove it would be
both equitable and practicable. Iowa R. Civ. P. 1.1201(2). “For good
reasons shown, the court may order referees making a partition in kind
to allot a particular tract or article to a particular party.” Iowa R. Civ. P.
1.1216.
Some limitations on in-kind partitions of real estate are well-
established under Iowa law. In-kind partition is not appropriate if a
division into separate parcels would depreciate their aggregate value.
Murphy v. Bates, 224 Iowa 389, 391, 276 N.W. 29, 30–31 (1937);
Branscomb v. Gillian, 55 Iowa 235, 236, 7 N.W. 523, 523 (1880).
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Further, “if a division in kind is impracticable and cannot be effected
without sacrifice in value and to the best interest of all parties,” then a
sale must be ordered. Nehls v. Walker, 215 Iowa 167, 168–69, 244 N.W.
850, 851 (1932). Notably, these limiting principles were recognized even
at a time when partition in kind was favored in Iowa. See Branscomb, 55
Iowa at 236, 7 N.W. at 523.
On first glance, Iowa law appears somewhat unique in that our
“default” method of partition is partition by sale. Compare Iowa R. Civ. P.
1.1201(2) (“Property shall be partitioned by sale and division of proceeds,
unless a party prays for partition in kind by its division into parcels and
shows that such partition is equitable and practicable.”), with 68 C.J.S.
Partition § 125, at 113. Our research reveals only one other state—
Kentucky—expresses a preference for partition by sale. See Ky. Rev.
Stat. Ann. § 389A.030(3) (West, Westlaw current through 2016 regular
sess.). That said, although only Iowa and Kentucky have codified the
preference for judicial sale, several other states tend not to utilize
equitable remedies that could obviate the need for a sale. See Yun-Chien
Chang & Lee Anne Fennell, Partition and Revelation, 81 U. Chi. L. Rev.
27, 30 (2014) (“Most American jurisdictions have a common law rule that
purports to favor partition in kind, but scholars suggest that courts
usually order partition by sale.”). One observer has noted that although
most states have claimed adherence “to the historical preference for
physical division,” there is a general trend toward judicial sales either
because the parties desire sale “or because courts are easily convinced
that sale is necessary for the fair treatment of the parties.” John G.
Casagrande, Jr., Note, Acquiring Property Through Forced Partitioning
Sales: Abuses and Remedies, 27 B.C. L. Rev. 755, 771 & n.141 (1986).
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B. Two Proposals for a Partition In Kind. In this case, Marcia is
the party seeking a partition in kind. Consistent with Iowa’s preference
for partition by sale, Marcia thus bears the burden of proving a partition
in kind would be both equitable and practicable. Iowa R. Civ. P.
1.1201(2).
Marcia offers two alternatives for an in-kind division that she
contends would be equitable and practicable. Both alternatives allocate
all or most of the Butler County farm to her. The first alternative
allocates most of the Butler County farm to her and gives Russell the
Hardin County farm plus a 70-acre parcel from the northern portion of
the Butler County property. The second alternative allocates all of the
Butler County property to Marcia and gives Russell the Hardin County
property plus an equalization payment offsetting the difference in value
between the two farms.
Russell rejects both alternatives and instead urges the sale of both
tracts. However, he contends in the alternative that if the court
concludes a partition in kind is equitable and practical, the Butler
County property should be allocated to him. Like Marcia, Russell
testified at trial and asserted in his brief that he would approve of a
partition that allocates all or most of the Butler County real estate to
him; however, also like Marcia, he does not wish to receive an in-kind
distribution of the Hardin County farm.
We now turn to the question of whether Marcia met her burden of
proof under either of her proposed alternatives.
1. Alternative 1: Hardin tract plus a parcel of Butler tract. Under
the first alternative, Marcia would receive the tillable portion of the
Butler County land and Russell would receive the tillable portion of the
land in Hardin County. The remaining acres would then be split between
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the parties, with Russell receiving the remainder of the Hardin County
land and a 70-acre parcel of the northernmost portion of the Butler
County land.
Although Russell and his expert conceded at trial that the division
of the Butler County land proposed by Marcia might appear feasible on
paper, they posited it would be neither equitable nor practicable in
reality. Having farmed the land for forty years, Russell credibly opined
that parceling off the northernmost portion of the Butler County land
consisting primarily of timber and hay ground would produce a parcel of
land that is not economically viable as a separate farming unit for several
reasons. Specifically, he explained (1) the parcel lacks access to fresh
water for livestock in the winter; (2) although the owner of the proposed
parcel could gain access to the east side, a river obstructs access to its
west side; (3) the existing fences on the parcel are inadequate for raising
livestock there; (4) the part of the parcel that is suitable for pasture is
subject to recurrent flooding; and (5) the parcel is too small to be
economically viable for raising livestock.
Marcia presented testimony from an expert appraiser disputing
Russell’s opinion on problems with access to the proposed parcel and
fencing if the parcel were to be separated from the Butler County farm.
These potential problems are insubstantial and surmountable, Marcia’s
expert asserted; and the parcel allocated to Russell from the Butler
County farm could be drawn entirely from the west side to avoid any
need to cross the river. Simply put, Marcia’s expert opined that a
practical and equitable division of the Butler County farm could be
achieved.
Like the trial court, we credit Russell’s testimony and find the in-
kind division of the Butler County farm proposed by Marcia would be
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impractical. Russell has farmed the tillable ground for more than forty
years. Because of this experience, Russell is more intimately familiar
than any other witness with the farm’s row-crop productivity potential,
its topographical features rendering parts of it vulnerable to flooding, and
its suitability for hay and pasture ground. We find this experience also
gives persuasive force to Russell’s opinion on the limited suitability of
access routes to the northern portion of the farm that Marcia proposes to
allocate to him. Lastly, we find Russell’s experience as a cattle farmer
also gives persuasive force to his opinions on the unattractiveness of the
proposed parcel for raising livestock. Accordingly, we find Marcia failed
to meet her burden to establish the in-kind division of the Butler County
farm is practical.
Marcia’s proposed in-kind division of the Butler County farm fails
for yet another reason. Russell’s expert appraiser persuasively opined
that—based on practical farming considerations—the value of the acres
Marcia proposed for allocation to Russell would be diminished if they
were separated from the rest of the farm. Accordingly, we conclude
Marcia’s proposed in-kind division setting aside part of the Butler County
farm to Russell must be rejected because the division into separate
parcels would depreciate their aggregate value. See Murphy, 224 Iowa at
391, 276 N.W. at 30–31; Branscomb, 55 Iowa at 236, 7 N.W. at 523.
2. Alternative 2: Hardin tract plus equalization payment. Under the
second alternative, Marcia would receive the Butler County farm and
Russell would receive the Hardin County farm, along with a sum of
money to equalize the value of the allocations. The payment of money as
a means of offsetting unequal distributions of real property in partition
actions is commonly referred to as “owelty.”
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Owelty is an equitable remedy developed at common law and used
in partition actions to equalize the value of property each party receives
through the payment of a sum of money from the recipient of the higher-
value property to the recipient of the lower-value property. Owelty,
Black’s Law Dictionary (3d pocket ed. 2006). Courts utilize the remedy
when “[i]n making divisions along natural and practical lines the
allotments cannot . . . be made of equal area or value” without impairing
the aggregate value of the parcels, and it would be disadvantageous to
sell the property. See Sawin v. Osborn, 126 P. 1074, 1075 (Kan. 1912);
68 C.J.S. Partition § 132, at 120; see also 59A Am. Jur. 2d Partition
§ 154, at 123–24. Courts in jurisdictions favoring partition in kind
regard owelty as preferable to partition by sale. See, e.g., Schnell v.
Schnell, 346 N.W.2d 713, 720–21 (N.D. 1984) (stating that partition in
kind with owelty should be preferred to sale); Chesmore v. Chesmore, 484
P.2d 516, 518 (Okla. 1971) (noting partition in kind with owelty is
preferable to sale); see also 68 C.J.S. Partition § 145, at 130. For that
reason, owelty is commonly justified as a means of avoiding judicial sale.
59A Am. Jur. 2d Partition § 155, at 124; see, e.g., Sawin, 126 P. at 1075;
R.R. Thompson Estate Co. v. Kamm, 213 P. 417, 418 (Or. 1923); Updike v.
Adams, 52 A. 991, 991–92 (R.I. 1902) (per curium).
Russell asserts owelty is not recognized as an available remedial
tool under Iowa law. He contends the Iowa Rules of Civil Procedure
governing partition actions leave no middle ground for owelty, permitting
only partition by sale or partition in kind. See Iowa R. Civ. P. 1.1201(2)
(“Property shall be partitioned by sale and division of the proceeds,
unless a party prays for partition in kind . . . , and shows that such
partition is equitable and practicable.”); see also 68 C.J.S. Partition §§ 2,
132, at 10, 120 (noting owelty is often “enabled by statute”). Russell
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further posits that our recognition of the doctrine of owelty would
undermine Iowa’s statutory preference for partition by sale. See Iowa R.
Civ. P. 1.1201(2).
Marcia contends owelty has long been recognized by courts of
equity and should be adopted in Iowa as an appropriate remedial tool in
partition actions. Because it is an equitable remedy and partition
actions are equitable proceedings, Roll contends sound public policy
should lead this court to adopt and apply owelty in this case.
Upon consideration, we need not decide whether the doctrine of
owelty is available in Iowa. Under the circumstances of this case, Marcia
cannot prove a superior claim of entitlement to the Butler County farm.
Like Marcia, Russell was raised on the farm and claims an abiding
connection to it. 4 Like Marcia, Russell has a child to whom he wishes to
succeed him in ownership of the family farm. And although Marcia and
her daughter live in Iowa in close proximity to the Butler County farm
and Russell lives in North Dakota, he has maintained an intimate
connection with the property by continuously farming it. Under these
unique circumstances, we cannot say the Butler County farm should be
set aside to Marcia “[f]or good reasons shown.” Iowa R. Civ. P. 1.1216.
Nor can we conclude it would be equitable to allocate the Butler County
farm to Marcia and award the Hardin County farm and some equalizing
4We do not overlook Marcia’s contention that Russell’s claim of attachment to
the family farm is less profound than hers because he made overtures to sell or trade
his interest several years ago. In our view, Russell’s unaccepted offers to amicably
separate his ownership interest from Marcia’s should be viewed as a good faith effort to
resolve differences rather than an expression of insubstantial attachment to the family
farm where he grew up and farmed as an adult for more than forty years. Likewise, we
do not consider Marcia’s refusal to pursue Russell’s settlement overtures giving her an
opportunity to obtain the Butler County land as evidence that she lacks a substantial
attachment to the Butler County farm.
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amount of money to Russell. 5 Although Marcia’s connection with the
family farm is sincere and profound, we cannot say it is measurably
superior to Russell’s or that equity therefore demands the property be
allocated to her. Thus, we do not decide in this case whether to adopt
the doctrine of owelty and leave that question for another day.
IV. Conclusion.
We conclude Marcia failed to meet her burden to prove a partition
in kind allocating all or most of the Butler County farm to her would be
practical and equitable. Accordingly, we vacate the decision of the court
of appeals and affirm the district court’s decision.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT JUDGMENT AFFIRMED.
5We have not overlooked Marcia’s contention that she will suffer an adverse tax
consequence from the sale of the Butler County farm. The parties have a low tax basis
in the property, and they both could experience a substantial gain and potential tax
liability from the sale. As both parties hold the same basis in the property, we cannot
say the potential tax consequences of the sale augur in favor of Marcia’s claim that
equitable principles should lead this court to allocate the Butler County farm to her.