Regional Utility Service Systems v. City of Mount Union, Iowa

IN THE SUPREME COURT OF IOWA
No. 14–2095
Filed January 29, 2016
REGIONAL UTILITY SERVICE SYSTEMS,
Appellee,
vs.
CITY OF MOUNT UNION, IOWA,
Appellant.
Appeal from the Iowa District Court for Henry County, John M.
Wright, Judge.
A city appeals a district court order finding its bank account was
not exempt from execution under Iowa Code section 627.18 (2013).
REVERSED AND REMANDED.
Steven E. Ort of Bell, Ort & Liechty, New London, for appellant.
Lucas C. Helling and Vanessa M. Young of Foss, Kuiken &
Cochran, P.C., Fairfield, for appellee.
2
WIGGINS, Justice.
A judgment creditor garnished a city’s bank account when the city
failed to pay a judgment. The city moved to quash the garnishment on
the grounds the bank account was exempt from execution under Iowa
Code section 627.18 (2013). The court denied the motion and found the
bank account was not exempt. The city appeals. On appeal, we find the
bank account was exempt from execution. Therefore, we reverse the
judgment of the district court and remand the case for further
proceedings consistent with this opinion.
I. Background Facts and Proceedings.
On June 18, 2014, the district court entered judgment for
$27,862.10 against the City of Mount Union in a breach of contract
action brought by the Regional Utility Service Systems Commission
(RUSS). The basis of that judgment is not at issue in this appeal. On
August 21, RUSS filed a praecipe directing the clerk of court to issue a
writ of general execution against the City. On August 25, the clerk of
court issued a writ of general execution commanding the county sheriff
to levy on all bank accounts held by the City at Iowa State Bank in
Mount Union. On September 1, the sheriff served the City with a notice
indicating RUSS had garnished its bank account in the amount of
$25,164.57. On September 3, the City filed a motion to quash the
garnishment, claiming the garnished funds were exempt from execution
under Iowa Code section 627.18. The district court heard evidence on
the motion to quash and claim of exemption.
At the hearing before the district court, Mayor John Marek testified
the garnished bank account was the only account the City had and
therefore contained both general funds and special funds, administration
3
and expenditure of which is limited to specific purposes by law. 1 He also
testified at length about the means by which the City generates revenue
and limitations on how the revenue it generates may be spent. His
testimony established the City collects only $17,000 to $18,000 per year
in property tax revenues it may allocate as general funds. Although the
City collects additional property, sales, and road-use tax revenues, the
law requires the City to designate those funds as special funds. The City
spends its general funds on garbage collection, landfill operation,
building maintenance, vehicle maintenance, streetlight operation,
elections, legal services, liability insurance, property insurance, fire and
police services, and compensation for the mayor, members of the city
council, a part-time clerk, a part-time maintenance person, and
contractors. Consequently, Mayor Marek testified the City’s general
funds were necessary for the City to fulfill the purposes for which it was
incorporated and necessary for it to continue to pay its officials and
provide basic services not paid for with special funds. Additionally,
Mayor Marek indicated that approximately $23,000 of the $25,000 in the
bank account represented special funds and indicated the budget
submitted by the City in support of its motion to quash the garnishment
supported this conclusion.
During the hearing, the district court instructed the parties to
submit briefs addressing what portion of the comingled funds in the
bank account were special funds. Relying on Mayor Marek’s testimony
1Where a special fund is created or set aside by statute for a particular
purpose or use, it must be administered and expended in accordance
with the statute, and may be applied only to the purpose for which it was
created or set aside, and not diverted to any other purpose, or
transferred from such authorized fund to any other fund.
Des Moines Metro. Area Solid Waste Agency v. Branstad, 504 N.W.2d 888, 890 (Iowa
1993) (quoting 81A C.J.S. States § 228 (1977)).
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and the budget submitted by the City, RUSS argued the account
contained $6550 in special funds. The City argued the account
contained only $1392 in general funds and submitted a supporting
affidavit signed by Mayor Marek and an exhibit listing the sources of the
remaining special funds.
The district court denied the motion to quash and the claim of
exemption. In its order denying the motion, the court acknowledged the
City depends on the money in its bank account to carry out the general
purposes for which the City was organized. In addition, the court
acknowledged a prior case in which we held public property other than
buildings owned by a city to be exempt from execution. See City of Fort
Dodge v. Moore, 37 Iowa 388, 388–90 (1873). However, the court found
no caselaw directly supporting the argument that general funds held by a
municipality may constitute public property exempt from execution
under section 627.18. Thus, the court concluded the City stood in the
same position as any other judgment debtor with nonexempt funds in a
bank account and denied its motion to quash the garnishment of its
general funds. Because the court found RUSS’s argument with respect
to the balance of special funds in the account to be more persuasive, the
court found the garnished account contained only $6550 in special
funds.
The City appeals the district court judgment denying its motion to
quash the garnishment.
II. Issues.
We must first decide whether the general funds in the City’s bank
account constitute “other public property” within the meaning of section
627.18. If they do, we then must decide whether the general funds in
5
the City’s bank account were “necessary and proper for carrying out the
general purpose” for which the City was organized.
III. Scope of Review.
We review questions of statutory construction for correction of
errors at law. Postell v. Am. Family Mut. Ins. Co., 823 N.W.2d 35, 41
(Iowa 2012). A factual finding by the district court is binding on this
court if substantial evidence supports it. GE Money Bank v. Morales, 773
N.W.2d 533, 536 (Iowa 2009). Substantial evidence supports a factual
finding only if the fact finder may reasonably infer the finding from the
evidence presented. Vaughan v. Must, Inc., 542 N.W.2d 533, 538 (Iowa
1996).
IV. Analysis and Discussion.
In its motion to quash the garnishment, the City claimed the
general funds in its bank account were exempt from execution under the
Iowa Code. The Code provides:
Public Property.
Public buildings owned by the state, or any county,
city, school district, or other municipal corporation, or any
other public property which is necessary and proper for
carrying out the general purpose for which such corporation
is organized, are exempt from execution.
Iowa Code § 627.18.
A. Whether the General Funds in the City’s Bank Account
Constitute Other Public Property Within the Meaning of Section
627.18. We begin our analysis by recounting basic principles of
statutory interpretation. When we interpret a statute, our goal is to
determine legislative intent. Auen v. Alcoholic Beverages Div., 679
N.W.2d 586, 590 (Iowa 2004). “We determine legislative intent from the
words chosen by the legislature, not what it should or might have said.”
Id. When the language in a statute is plain and unambiguous such that
6
reasonable persons cannot disagree as to its meaning, we need not resort
to rules of statutory construction. Zimmer v. Vander Waal, 780 N.W.2d
730, 733 (Iowa 2010). When statutory definitions bearing on the
meaning of the words in a statute exist, those definitions serve as the
foundation of our analysis. Id. When the language of a statute has
changed little over time, we look to its origins to discern legislative intent.
See Woodbury County v. City of Sioux City, 475 N.W.2d 203, 205 (Iowa
1991). Thus, when interpreting a statute originating in the early history
of our state, the common law informs our interpretation. See id.Finally, when interpreting a statute, we may not mitigate the
hardships either party presumes will flow from its enforcement, nor
impose our personal opinions as to its wisdom. Kneppe v. Huismann,
223 Iowa 569, 571, 272 N.W. 602, 603 (1937). Particularly in the
context of interpreting grants of powers and rights to public corporations,
doubt or ambiguity arising out of the terms the legislature used must be
resolved in favor of the public. See Clark, Dodge & Co. v. City of
Davenport, 14 Iowa 494, 500 (1863). As the Code instructs, it is
presumed the legislature intended the public interest to be favored over
any private interest in enacting a statute. See Iowa Code § 4.4(5).
Iowa Code section 4.1 contains three statutory definitions bearing
on the meaning of the phrase “other public property” in section 627.18.
These definitions serve as the foundation of our analysis so long as they
are not “inconsistent with the manifest intent of the general assembly, or
repugnant to the context of the statute.” Iowa Code § 4.1. First, section
4.1(24) defines the term “property” to include both “personal and real
property.” Id. § 4.1(24). Second, section 4.1(21) defines the phrase
“personal property” to include “money, goods, chattels, evidences of debt,
and things in action.” Id. § 4.1(21). Third, section 4.1(13) defines the
7
phrase “real property” to include “lands . . . and all rights thereto and
interests therein.” Id. § 4.1(13).
Because the Code includes statutory definitions bearing directly on
the meaning of the phrase “other public property,” we construe the
phrase to accommodate these definitions in the absence of contrary
legislative intent. See Groenendyk v. Fowler, 204 Iowa 598, 601, 215
N.W. 718, 720 (1927). When interpreted in harmony with these
statutory definitions, the plain language of section 627.18 creates a
municipal right to exempt real property and personal property from
execution, including money held in a bank account. In other words, the
inclusion of the phrase “other public property” in section 627.18
indicates municipal corporations may claim as exempt from execution
virtually any property that is “necessary and proper for carrying out the
general purpose for which such corporation is organized.” Iowa Code
§ 627.18.
The legislative history of section 627.18 yields no evidence of
contrary legislative intent. On the contrary, legislative history supports
construing section 627.18 in harmony with the statutory definitions
contained in section 4.1. The statutory provision creating the exemption
from execution for public property now contained in section 627.18 first
appeared in the 1851 Code. The language of the statutory exemption
from execution has changed little over time. In fact, nearly identical
language to that contained in section 627.18 appeared the 1851 Code,
which provided in relevant part:
Public property exempt. Public buildings owned by the
state or any county, city, school district, or other civil
corporation, and any other public property which is
necessary and proper for carrying out the general purpose
for which any such corporation is organized, are exempt
from execution.
8
Iowa Code § 1895 (1851). 2 The 1851 Code also included definitions of
the terms “property,” “personal property,” and “real property” identical to
those appearing in the modern Code. Compare Iowa Code § 26(8)–(10)
(1851), with Iowa Code § 4.1(13), (21), (24) (2013). 3
Likewise, the common law offers no basis for disregarding the
relevant statutory definitions in interpreting section 627.18. See
Woodbury County, 475 N.W.2d at 205. For example, the first edition of
Black’s Law Dictionary acknowledged the term “property” as being “a
very wide term” that “includes every class of acquisitions which a man
can own or have an interest in.” Black’s Law Dictionary 953–54 (1st ed.
1891). In fact, the notion that a person possesses an absolute and
fundamental right of private property consisting of “the free use,
enjoyment, and disposal of all his acquisitions” has been a foundational
premise of the common law since at least the time of Blackstone. See
Kerry v. Din, 576 U.S. ___, ___, 135 S. Ct. 2128, 2133, 192 L. Ed. 2d 183,
188 (2015) (quoting 1 William Blackstone, Commentaries on the Laws of
England 134 (1769)).
We have never addressed the question of whether general funds in
a municipal bank account may constitute public property for purposes of
the exemption from execution contained in section 627.18. However,
nothing in our caselaw suggests the phrase “other public property”
excludes bank accounts containing general funds. We have previously
construed the phrase “other public property” to encompass personal
2Section 1895 of the 1851 Code contained an additional sentence, which
provided that “property of a private citizen can in no case be levied upon to pay the debt
of a civil corporation.” Iowa Code § 1895 (1851). The legislature removed the bulk of
this sentence from the Code in 1981. See 1981 Iowa Acts ch. 182, § 4 (codified at Iowa
Code § 627.18 (1983)).
3Neither the exemption from execution for public property nor these definitions
appeared in the Revised Statutes of the Territory of Iowa (1843).
9
property. See Moore, 37 Iowa 388–90 (holding lumber, tools, and other
chattels owned by a municipal corporation were exempt from execution
under Iowa Code section 3274, now section 627.18). In addition, we
have long acknowledged the breadth of the term “property.”
The term “property” is said to be nomen generalissimum and
to include everything which is the subject of ownership,
corporeal or incorporeal, tangible or intangible, visible or
invisible, real or personal; everything that has an
exchangeable value, or which goes to make up one’s wealth
or estate.
Wapsie Power & Light Co. v. City of Tipton, 197 Iowa 996, 1000, 193 N.W.
643, 645 (1923); see also Reynolds v. Miller, 6 Iowa 459, 461 (1858)
(explaining the term “property” as defined in Iowa Code section 26(10),
now section 4.1(24), encompasses “every interest a man may have in any
property, real or personal” such that it is “equivalent to the word ‘estate,’
as used in relation to wills”).
Consequently, we conclude the general funds in a municipal bank
account constitute “other public property” exempt from execution under
Iowa Code section 627.18 so long as they are necessary and proper for
carrying out the general purpose for which the municipality is organized.
This conclusion accords not only with the statutory definitions in the
Code and the common law existing when the general assembly enacted
the statutory exemption from execution for public property, but also with
our caselaw and the scope of the exemption from execution for public
property in other jurisdictions. See P.H.V., Annotation, Municipal Funds
and Credits as Subject to Levy Under Execution or Garnishment on
Judgment Against Municipality, 89 A.L.R. 863, 864 (1934) (“The courts
are practically unanimous in holding that the funds or credits of a
municipality or other public body exercising governmental functions,
acquired by it in its governmental capacity, may not be reached by its
10
creditors by execution under a judgment against the municipality, or by
garnishment served upon the debtor or depository of the municipality.”).
B. Whether the General Funds in the City’s Bank Account
Were Necessary and Proper for Carrying Out the General Purpose for
Which the City Was Organized. RUSS argues the general funds were
not necessary and proper for carrying out the general purpose for which
the City was organized, urging the City presented no evidence it has been
unable to fulfill the purposes for which it was incorporated since its
general funds were garnished. The City argues RUSS failed to preserve
this issue on appeal by failing to cross-appeal from an adverse ruling by
the district court.
Ordinarily a successful party need not cross-appeal on a ground
presented to but ignored or rejected by the district court to preserve
error. EnviroGas, L.P. v. Cedar Rapids/Linn Cty. Solid Waste Agency, 641
N.W.2d 776, 781 (Iowa 2002) (quoting Johnson Equip. Corp. of Iowa v.
Indus. Indem., 489 N.W.2d 13, 16 (Iowa 1992)). But this general rule
applies only when the party received a favorable ruling on the claim at
issue. See Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 398–99 (Iowa
2001); Ritz v. Wapello Cty. Bd. of Sup’rs, 595 N.W.2d 786, 789 (Iowa
1999); Venard v. Winter, 524 N.W.2d 163, 165 (Iowa 1994). “This is
because a party need not, in fact cannot, appeal from a favorable ruling.”
Garling Const., Inc. v. City of Shellsburg, 641 N.W.2d 522, 523 (Iowa
2002) (quoting Johnson Equip., 489 N.W.2d at 16). Our determination as
to whether RUSS preserved the argument that the general funds were
not necessary and proper for carrying out the general purpose for which
the City was organized turns on whether RUSS received an adverse
ruling from the district court on this issue from which it could have
appealed.
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The sole issue before the district court was whether the City was
entitled to the statutory exemption from execution from public property,
and RUSS received a favorable ruling denying the claim of statutory
exemption. Although the district court made an adverse finding in
arriving at that ruling, RUSS could not appeal the ruling in its favor.
Thus, RUSS preserved its argument that the general funds were not
necessary to the general purpose for which the City was organized as
there was no adverse ruling from which it could have appealed.
The district court found the City depends on the general funds in
its bank account to carry out the general purposes for which the City
was organized. This finding is binding on appellate review so long as
substantial evidence actually presented to the district court supports it.
See Morales, 773 N.W.2d at 536. Of course, in determining whether
substantial evidence supports a district court finding, we do not weigh
the evidence. See Allison-Kesley Ag Ctr., Inc. v. Hildebrand, 485 N.W.2d
841, 844 (Iowa 1992). Rather, “we only decide if there is a proper basis
upon which the trial court could find as it did.” Id. (quoting Arbie Mineral
Feed Co. v. Nissen, 179 N.W.2d 593, 595 (Iowa 1970))
We have never specified a legal test for determining whether
property is “necessary and proper for carrying out the general purpose
for which such corporation is organized” in evaluating claims of
exemption brought under section 627.18. Nor does either party advance
a specific legal test for determining whether public property meets this
prerequisite of the statutory exemption from execution. However, we
long ago concluded a recitation of statutory language is sufficient to state
a claim of statutory exemption from execution. Moore, 37 Iowa at 390.
The City presented ample evidence from which the district court
could have reasonably inferred the general funds in its bank account
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were necessary to the general purposes for which the City was organized.
Mayor Marek testified the general funds were necessary for the City to
fulfill the purposes for which it was incorporated because without them
the City would unable to pay its officials or provide basic services it could
not pay for with special funds. In addition, the City submitted various
documents to support its allegation that the general funds were
necessary and proper to carrying out the general purposes for which it
was organized, including a copy of its budget for the present fiscal year
along with schedules summarizing its recent historical revenues and
expenditures. Consequently, we conclude the district court based its
finding on substantial evidence.
Because the determination of whether a finding is supported by
substantial evidence requires us to consider the evidence actually
presented to the district court, it is irrelevant that the City presented no
evidence on appeal suggesting it was unable to fulfill the purposes for
which it was incorporated after its general funds were garnished.
Moreover, although RUSS cross-examined Mayor Marek at the hearing
on the motion to quash, RUSS produced no other evidence tending to
undermine the conclusion that the general funds were necessary and
proper to carrying out the general purposes for which the City was
organized.
In its order denying the motion to quash the execution, the district
court found the special funds are dedicated to the purposes set forth by
the government entities that provide them whereas the use of general
funds is unrestricted. However, the court made no explicit finding that
the general funds were proper to carrying out the general purposes for
which the City was organized. Thus, we must determine whether the
funds were proper for that purpose.
13
The meaning of the word “proper” may depend on context. See
Lockhart v. Cedar Rapids Cmty. Sch. Dist., 577 N.W.2d 845, 847 (Iowa
1998). For example, property may be “proper” for carrying out a specific
purpose in the sense that it is “suitable, right, fit, or correct” to use the
property in carrying out that purpose. Black’s Law Dictionary, 1410
(10th ed. 2014). Alternatively, property may be “proper” for carrying out
a specific purpose in the sense it is “allowable, right, and becoming” to
use the property for such purposes. Id.We need not parse the shades of meaning between competing
definitions of the term “proper” to resolve the question before us,
however. We conclude that regardless of the precise meaning of the term
“proper,” it is obvious the general funds were proper to carrying out the
general purpose for which the City was organized. Notably, neither party
disputed the propriety of using such funds for carrying out that purpose
or the propriety of the means by which the City collected the funds.
More importantly, at the hearing on the motion to quash the execution,
Mayor Marek testified use of the general funds was unrestricted by law
and indicated the general funds derived from property taxes assessed at
a rate allowed by law.
Therefore, we conclude the general funds qualified as exempt from
execution under Iowa Code section 627.18.
V. Disposition
We reverse the judgment of the district court denying the City’s
motion to quash the garnishment and remand the case to the district
court for further proceedings consistent with this opinion.
REVERSED AND REMANDED.