Ronald C. Brownlee, Glenda F. Brownlee, Daniel R. Brownlee, Megan L. Brownlee, D/B/A Brownlee Farm Partnership v. James D. Jamison, Individually, Jeff Jamison, Individually and Jointly, D/B/A Jamison & Sons, A/K/A Jamison & Sons Ag Services, A/K/A J&S Ag Services, and Marvin Mitchell, A/K/A Russ Mitchell D/B/A Mitchell Consulting, A/K/A Mark Hendrichs, and James D. Jamison Irrevocable Trust, Ronald Gale McDowell, Trustee of the James D. Jamison Irrevocable Trust

IN THE COURT OF APPEALS OF IOWA
No. 14-1862
Filed April 6, 2016
RONALD C. BROWNLEE, GLENDA F.
BROWNLEE, DANIEL R. BROWNLEE,
MEGAN L. BROWNLEE, d/b/a
BROWNLEE FARM PARTNERSHIP,
Plaintiffs-Appellees,
vs.
JAMES D. JAMISON, Individually, JEFF
JAMISON, Individually and Jointly, d/b/a
JAMISON & SONS, a/k/a JAMISON &
SONS AG SERVICES, a/k/a J&S AG
SERVICES, and MARVIN MITCHELL,
a/k/a RUSS MITCHELL d/b/a MITCHELL
CONSULTING, a/k/a MARK HENDRICHS,
and JAMES D. JAMISON IRREVOCABLE
TRUST, RONALD GALE MCDOWELL,
Trustee of the James D. Jamison Irrevocable Trust,
Defendants-Appellants.
________________________________________________________________
Appeal from the Iowa District Court for Clarke County, Sherman W.
Phipps, Judge.
Defendants appeal from an adverse grant of summary judgment on the
plaintiffs’ claim for equitable mortgage. REVERSED AND REMANDED.
John P. Roehrick of Gaudineer & George, L.L.P., West Des Moines, for
appellants.
Jeff W. Wright and Joel D. Vos of Heidman Law Firm, L.L.P., Sioux City,
for appellees.
Heard by Danilson, C.J., and Mullins and McDonald, JJ.
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MCDONALD, Judge.
The defendants appeal from an adverse grant of summary judgment in
this action involving the equitable mortgage doctrine. The district court held the
plaintiffs had established an equitable mortgage as a matter of law. We conclude
there is a triable issue of fact regarding whether the parties intended a sale of
real property of only an equitable mortgage. We thus reverse and remand for
further proceedings.
I.
The summary judgment record establishes the following. Ronald, Glenda,
Daniel, and Megan Brownlee d/b/a Brownlee Farm Partnership owned and
operated a family farm. By 2009-2010, the farming operation was in financial
straits. Between November 25, 2009, and March 2, 2010, Ronald and Daniel
forged the endorsement of Farmer’s Trust and Savings Bank (hereinafter
“FTSB”) on certain checks made payable jointly to the bank and the Brownlees
and deposited the checks into the farm’s accounts. FTSB was a creditor of the
farming operation.
In July of 2010, FTSB commenced foreclosure proceedings on the farm.
Around the same time, the Brownlees saw an advertisement in the Des Moines
Register offering “refinancing/operating lending help.” The advertisement was
placed in the Des Moines Register by Marvin Mitchell. The Brownlees met with
Mitchell to discuss their financial situation.
On March 28, 2011, the Brownlees entered into a Consulting Agreement
with Mitchell through Jamison & Sons Ag Services. The agreement provided
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Mitchell would provide consultation and other services to the Brownlees,
including advice on reorganization, efforts to renegotiate and restructure the
debt, efforts to obtain new financing, and efforts to obtain loan approval. The
agreement also required the Brownlees to purchase their seed, herbicide,
fungicide, and insecticide from Jamison & Sons Ag Services. The agreement
also provided the “Client shall pay Consultant . . . an additional sum of 2% of the
gross loan amount or amount of credit applied for/restructured amount/reduced
amount arranged for, obtained by or obtained from efforts of the Consultant for
Client.” All late fees incurred a 1.5 percent late charge. The agreement also
stated “unpaid fees . . . attach as 1st secured party to loans to be dispersed to
Client and property of Client used to receive the loan(s) or restructuring.” On
March 28, 2011, the Brownlees signed an information release to give Jamison &
Sons Ag Services access to the Brownlees’ financial information.
The decrees of foreclosure were entered on April 4, 2011. On April 19,
2011, FTSB sent Mitchell the Brownlees’ current payoff schedule in the mail. By
this time, the bank was aware the Brownlees had forged FTSB’s endorsements
on certain checks and misappropriated the funds. In the payoff schedule
provided to Mitchell, there was a line item documenting the amount still owed to
satisfy the claim of the insurance company that compensated the bank on the
forgery loss. It was identified in the schedule as “Forgery Ins.”
On April 27, 2011, the Brownlees entered into a Repurchase Agreement.
The Repurchase Agreement provided the Brownlees would sell their farm
property to James Dean Jamison in exchange for him “settling all current debts
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and/or current fees due [FTSB]” The settlement amount was not to “exceed the
amounts as represented in attachments N, O & P or $1,800,000.00 whichever is
less.” The agreement stated:
This amount will be paid by buyer as follows. $10,000.00 paid upon
execution of this agreement to the David Leitner Law Firm Trust
account, $121,522.76 paid upon agreement between buyer and
Farmer’s Trust & Savings Bank of clear lien free possession of the
above named property to farm by the buyer in 2011, balance to be
paid in full upon Farmer’s Bank & Trust and sellers providing
agreeable payoffs and clear and merchantable title free of any and
all liens or claims to buyer and transferring any 1st mortgage rights
to buyer along with all satisfaction of buyer’s closing request
including but not limited to buyers due diligence addendum
Attachment Q and requested closing information.
The Repurchase Agreement stated, “Sellers agree to offer to repurchase the
above named property on or before December 31, 2011 from the buyer for all of
the amounts paid in regards to the above property by the buyer, plus 1% per
month interest on all monies paid by buyer.” The repurchase agreement also
gave Jamison & Sons Ag Services a “1st secured interest in favor of the buyer
from the sellers on the above named property for all crops, crop insurance or
proceeds of crops grown or intended to be grown on the above property in 2011.”
The agreement allowed the Brownlees to remain on the property as renters until
December 2011, with rent of $135,000 due on November 15, 2011.
On August 16, 2011, Mitchell sent the Brownlees an invoice for debt
restructuring services in the amount of $36,102.47 due by August 19, 2011. On
August 19, 2011, the Brownlees executed warranty deeds conveying their
property to the James D. Jamison Irrevocable Trust. On November 26, 2011,
Mitchell sent the Brownlees a letter stating the money due to J&S Ag Services
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was past due. In the letter Mitchell stated: “You are way delinquent with J & S Ag
Services (Jamison). Be aware that another foreclosure will more likely be
coming from Jamison should your debts to him be let go much longer. Mr.
Jamison has been more patient and accommodating to you people than any of
your past creditors.” The Brownlees did not satisfy the debt or make an offer to
repurchase the property. On February 3, 2012, the James D. Jamison
Irrevocable Trust sold the farmland to a third party for $3.25 million.
As the Brownlees were attempting to resolve their financial situation, the
federal government was investigating the Brownlees’ check forgeries. Daniel
was indicted on March 21, 2012. In September 2012, Daniel pleaded guilty to
bank fraud. In October 2012, Ronald pleaded guilty to bank fraud. He deceased
prior to his sentencing.
The plaintiffs filed their petition on July 30, 2012, against James D.
Jamison, Jeff Jamison, Jamison & Sons, Jamison & Sons Ag Services, Marvin
Mitchell, Mitchell Consulting, the James D. Jamison Irrevocable Trust, and
Ronald Gale McDowell, Trustee of the James D. Jamison Irrevocable Trust. The
plaintiffs’ petition was in two counts: (1) equitable mortgage; and (2) fraudulent
inducement and misrepresentation. The parties filed cross motions for summary
judgment. The plaintiffs contended they had established an equitable mortgage
as a matter of law. The defendants contended there was an issue of fact on the
equitable mortgage claim or that they were entitled to judgment as a matter of
law because the Brownlees acted with unclean hands. Specifically, the
Brownlees had misled the defendants regarding the forgeries. The district court
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denied summary judgment on the defendants’ motion. The court concluded
“there is a material fact as to whether or not the forgeries in any way impacted or
influenced the parties in entering into the Repurchase Agreement.” The district
court granted the plaintiffs’ motion for summary judgment on count one, holding
the Brownlees established an equitable mortgage as a matter of law. This is a
timely interlocutory appeal from the district court’s ruling on the parties’ motions
for summary judgment.
II.
We review the district court’s summary judgment ruling for the correction
of legal error. See Osmic v. Nationwide Agribusiness Ins. Co., 841 N.W.2d 853,
858 (Iowa 2014). Summary judgment should be granted only “if the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” Iowa R. Civ.
P. 1.981(3). The party seeking summary judgment has the burden of
establishing that the facts are undisputed and that the party is entitled to a
judgment as a matter of law. See Estate of Harris v. Papa John’s Pizza, 679
N.W.2d 673, 677 (Iowa 2004). The party resisting the motion “cannot rely on the
mere assertions in his pleadings but must come forward with evidence to
demonstrate that a genuine issue of fact is presented.” Stevens v. Iowa
Newspapers, Inc., 728 N.W.2d 823, 827 (Iowa 2007).
The court reviews the summary judgment record in the light most
favorable to the party resisting the motion for summary judgment and “indulge[s]
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in every legitimate inference that the evidence will bear in an effort to ascertain
the existence” of a genuine issue of material fact. See Crippen v. City of Cedar
Rapids, 618 N.W.2d 562, 565 (Iowa 2000). If the summary judgment record
shows that the “resisting party has no evidence to factually support an outcome
determinative element of that party’s claim, the moving party will prevail on
summary judgment.” Wilson v. Darr, 553 N.W.2d 579, 582 (Iowa 1996). Our
court “can resolve a matter on summary judgment if the record reveals a conflict
concerning only the legal consequences of undisputed facts.” Boelman v.
Grinnell Mut. Reins. Co., 826 N.W.2d 494, 501 (Iowa 2013).
III.
We turn to the merits of the issue. An equitable mortgage is a lien on
property to secure the payment of money that lacks the essential features of a
legal mortgage. Our courts “have always recognized that ‘a conveyance
absolute on its face may, by proper evidence, be shown to be but a mortgage.’”
Steckelberg v. Randolph, 404 N.W.2d 144, 148 (Iowa 1987) (alterations omitted)
(quoting Trucks v. Lindsey, 18 Iowa 504, 504 (Iowa 1865)); see also Lovlie v.
Plumb, 250 N.W.2d 56, 59 (Iowa 1977) (“It is well settled a transfer of title
absolute on its face, if intended as security alone, will be deemed a mortgage.
And such intent may be shown by parol.”). In determining whether a conveyance
or mortgage was intended, each case must be decided “on the totality of its own
facts.” Koch v. Wasson, 161 N.W.2d 173, 178, 178 (Iowa 1968). The court may
look beyond the instrument itself and at the relationship between the parties.
Steckelberg, 404 N.W.2d at 149; Koch, 161 N.W.2d at 178; Brown v. Hermance,
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10 N.W.2d 66, 68 (Iowa 1943). Parol evidence may be reviewed to determine
the intent of the parties. See Steckelberg, 404 N.W.2d at 149. The reason the
court admits parol evidence is to “show that an absolute deed is in reality . . . a
mortgage . . . [so] that a court of equity will not construe a statute designed to
prevent fraud in such a manner as to produce fraud.” Bigler v. Jack, 87 N.W.
700, 701 (Iowa 1901). The ultimate question is “whether [the parties] intended
for the deed to serve as security for some obligation; if they did, the courts will
convert the transaction into a mortgage by operation of law.” Restatement
(Third) of Mortgages § 3.2 cmt. a (Am. Law Inst. 1996).
The grantor “carries the burden to show by clear and convincing evidence
that the deed was intended to be something other than what it purports to be.”
Koch, 161 N.W.2d at 178. See, e.g., Steckelberg, 404 N.W.2d at 148-49 (“If,
however, a deed is to be construed as a security instrument, ‘the supportive
evidence must be clear, satisfactory, and convincing.’” (quoting Lovlie, 250
N.W.2d at 59)); Collins v. Isaacson, 158 N.W.2d 14, 18 (Iowa 1968) (“In order
that a deed be held a mortgage the evidence must be clear, satisfactory and
convincing.”).
The summary judgment record reveals several facts that could show the
parties intended only a security arrangement. First, inadequate consideration
tends to show the “transaction was intended to be a mortgage.” Koch, 161
N.W.2d at 178; Bigler, 87 N.W. 702 (“If such inadequacy appeared, it would, no
doubt, be strong evidence in support of [a] contention.”); Hughes v. Sheaff, 19
Iowa 335, 341 (Iowa 1865) (stating it is strong evidence a security was intended
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when “the consideration for the conveyance was much less than the value of the
property”). In this case, the Brownlees transferred their property to the James D.
Jamison Irrevocable trust for $1.8 million in exchange for settling their debts.
Shortly thereafter, the Jamison Trust sold the property to a third party for $3.25
million. This could be evidence of inadequate consideration, but given the
Brownlees’ issues with the bank and financial distress, it may also be evidence of
a purchaser taking a risk in a messy real estate transaction. Regardless, the
“mere inadequacy of consideration is not sufficient to justify the conclusion that a
deed absolute in form is intended as a mortgage.” Fort v. Colby, 144 N.W. 393,
403 (Iowa 1913). Inadequacy of consideration is a material fact that should be
considered along with other circumstances. Id.
Another indicator the parties intended a mortgage is the grantor retains
possession of the property. Koch, 161 N.W.2d at 178. This “is considered a
circumstance consistent with the claim of creditor-debtor relationship and
inconsistent with the theory of absolute conveyance.” Id. Here, the Brownlees
retained possession of the deeded property. As with the prior factor,
relinquishment of the property, however, is not conclusive. Id. “‘[I]t is not at all
an unusual circumstance that a deed given as a mortgage is accompanied or
followed by a surrender of possession or by a lease to the grantor.’” Id. (citation
omitted).
Another circumstance evidencing a security interest rather than a
conveyance is the creation or existence of a debtor-creditor relationship. See
Steckelberg, 404 N.W.2d at 149 (“A telltale sign that a deed, absolute on its face,
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amounts only to an equitable mortgage appears where the transaction of which it
is a part operates to create or continue as between the parties the relation of
obligor and obligee.”). Here, the Jamisons had a creditor-debtor relationship with
the Brownlees. For example, in the collection letter sent to the Brownlees,
Mitchell stated “Mr. Jamison has been more patient and accommodating to you
people than any of your past creditors.” As with the other factors, however, this
fact is just one of many relevant considerations.
The right to redeem the property is another circumstance that shows the
parties intended a mortgage. “If the deed was intended as security, the settled
policy of the law accords [the mortgagor] the right to redeem.” Brown, 10 N.W.2d
at 68. When a “mortgagor deeds the property to the mortgagee, the deed is
presumed to be but a continuation of the security and the right of redemption is
presumed to continue.” Koch, 161 N.W.2d at 176 (citation omitted). Here, the
Brownlees had the right to repurchase the property on certain conditions. The
repurchase agreement stated the “Sellers agree to offer to repurchase the above
named property on or before December 31, 2011 from the buyer for all of the
amounts paid in regards to the above property by the buyer, plus 1% per month
interest on all monies paid by buyer.” It is not disputed the Brownlees did not
repurchase the property or make an offer to repurchase the property on the
terms and conditions provided.
There is also evidence, the defendants argue, the parties intended an
absolute conveyance. First, the Jamison Trust was a third party and was not a
party to the prior agreements. Second, the Jamisons argue there was no
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landlord-tenant relationship. The defendants contend the rent referenced in the
parties’ repurchase agreement was repayment for the rent advanced by Jim
Jamison to FTSB for the Brownlee’s farming operation in 2011. The defendants
argue there was no debtor-creditor relationship between the Brownlees and the
Jamison Trust.
The ultimate inquiry in determining whether the parties intended a
mortgage or conveyance is the parties’ intent. “The conduct of the parties
leading up to the making of a deed from mortgagor to mortgagee is frequently of
great weight in determining whether the intent was to buy and sell or merely give
security in a new form.” Davis v. Wilson, 21 N.W.2d 553, 557 (Iowa 1946).
“Likewise their subsequent conduct frequently throws light upon their
understanding and intent in entering into the transaction.” Id. Given the rather
unique circumstances of this case, including the complicated transactional
history, the interconnectedness of the defendants and their business operations,
and the convictions of the Brownlees for forgery related to the financing of the
farming operation, we cannot conclude the Brownlees established the existence
of an equitable mortgage as a matter of law. See Harper v. Kaczor, No. 10-1833,
2011 WL 3925435, at *6 (Iowa Ct. App. Sep. 8, 2011) (“When, as here, the
interpretation of a contract depends upon the credibility of extrinsic evidence, the
question of interpretation should be determined by the finder of fact.”); see also
Robinson v. Builders Supply & Lumber Co., 586 N.E.2d 316, 323 (Ill. Ct. App.
1991) (reversing summary judgment and remanding for trial on equitable
mortgage claim); New York TRW Title Ins. v. Wade's Canadian Inn & Cocktail
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Lounge, Inc., 605 N.Y.S.2d 139, 141 (N.Y. App. Div. 1993) (“While an equitable
mortgage thus cannot be ruled out as a matter of law, we cannot say on this
record that it is warranted as a matter of law either. Rather, we discern the
presence of factual issues with regard to the parties' intent.”); Pearson v. Gray,
954 P.2d 343, 346 (Wash. Ct. App. 1998) (summarizing evidence tending to
support the existence of an equitable mortgage but reversing grant of summary
judgment where the “issue of the parties’ intent is sufficiently presented” to create
a triable issue of fact).
IV.
For the foregoing reasons, we reverse the district court’s grant of
summary judgment and remand this matter for further proceedings.
REVERSED AND REMANDED.