Iowa Court of Appeals Affirms Division of Two Farms Properties in Partition Action

On October 5, 2022, the Iowa Court of Appeals affirmed the division of two properties between a farmer and his two sisters. Relying on the factors set forth in Iowa Code § 651.31, the farmer claimed he would experience “great prejudice” if he was not awarded both farms. However, the court must only consider these factors when weighing the whether the presumption of a partition in kind is equitable. After the court orders a partition in kind, “the proceedings shall be governed by the procedures set forth in subchapter II that are applicable to a partition in kind.” Iowa Code § 651.32.

Facts

Leo and Helena Bruhn owned two parcels of farmland. The “Home Place” consisted of 160 acres and the “Meyer Farm” consisted of 240 acres. Their grandson farmed these two parcels of land as part of his 9,000 acre operation. This farmer lived on the Home Place.

The Bruhn’s will gave their son Dale a life estate in the Home Place as well as a life estate in the northern half of the Meyer Farm. Dale’s children were named as remaindermen. The will also gave their daughter a life estate in the southern portion of the Meyer Farm and named her children as remaindermen.

In 1995, the farmer negotiated with his siblings to obtain title to a seven-acre acreage on the Home Place in exchange for his remainder interests in the two properties. By the time Dale passed away in 2019, the farmer had purchased his two brothers’ remainder interests. Thus, he owned a one-half interest in each parcel while his two sisters each owned a quarter share of the properties. 

As a result of the strained relationship between the farmer and his two sisters, the farmer petitioned for a partition by sale. The parties agreed that the property qualified as “heirs property.” See Iowa Code § 651.1(5). Applying the special provisions of Iowa law for a partition of heirs property, the district court determined that the property should partitioned in kind because it would not create a great prejudice to either party. See Iowa Code §§ 651.27-.32.

Accordingly, the district court awarded the Home Place to the farmer and equal, undivided interests in the Meyer Farm to the two sisters. Because the Home Place was appraised at a higher value, the court also ordered the farmer to pay the two sisters an owelty of $173,360. The farmer appealed.

Iowa’s Partition Law

In 2018, the Iowa Legislature created a new subchapter to Iowa’s partition law. See 2018 Iowa Acts ch. 1108, §§ 27–32. Iowa law now favors a partition in kind of a family farm instead of a partition by sale. Additionally, when a cotenant requests a partition by sale, the other cotenants may buy out the interest of the requesting cotenant at fair market value. Iowa Code § 651.29. In this case, the sisters declined to purchase their brother’s interest.

If the parties decline to exercise the buyout option, the court must order a partition in kind unless it finds that the division will result in “great prejudice to the cotenants as a group.” Iowa Code § 651.30. In making this determination, relevant factors include:

a. Whether the heirs property can be practicably divided among the cotenants.

b. Whether a partition in kind will apportion the heirs property in such a way that the aggregate fair market value of the parcels resulting from the division will be materially less than the value of the heirs property if the heirs property is sold as a whole, taking into account the condition under which a court-ordered sale likely will occur.

c. Evidence of the collective duration of ownership or possession of the heirs property by a cotenant and one or more predecessors in title or predecessors in possession to the cotenant who are or were relatives of the cotenant or each other.

d. A cotenant’s sentimental attachment to the heirs property, including any attachment arising due to the heirs property having ancestral or other unique or special value to the cotenant.

e. The lawful use being made of the heirs property by a cotenant and the degree to which the cotenant will be harmed if the cotenant cannot continue the same use of the heirs property.

f. The degree to which a cotenant has contributed the cotenant’s pro rata share of the property taxes, insurance, and other expenses associated with maintaining ownership of the heirs property, or has contributed to the physical improvement, maintenance, or upkeep of the heirs property.

g. Tax consequences.

h. Any other factors the court deems relevant

Iowa Code § 651.31. Based on these factors, the farmer claimed that he would suffer great prejudice if he was unable to continue farming both parcels. However, the court must only consider the “great prejudice” factors to determine whether there should be a partition in kind, not to determine whether the court’s ultimate division will result in great prejudice. Conversely, if there is a great prejudice, the court will order a partition by sale. Iowa Code § 651.30. Although the farmer originally requested a partition by sale, he no longer wanted that remedy.

Partition in Kind Proposals

A partition in kind must be equitable and practicable. Iowa Code § 651.2. At trial, the court heard recommendations from two real estate professionals. The first appraiser proposed awarding the Meyer Farm and the northern twenty-six acres of the Home Place to the sisters, while the farmer received the remaining portion of the Home Place. This recommendation also included a $380 owelty payment to the farmer.

A second appraiser proposed also proposed awarding the Meyer Farm to the sisters as well as a twelve acre triangular parcel of the Home Place. However, as noted by the first appraiser, a creek cut off this parcel making it difficult to access.  

After hearing the recommendations, the district court fashioned its own remedy awarding the Home Place to the farmer and the Meyer Farm and a $173,360 owelty payment to the sisters. In reaching its decision, the district court did not hold the sisters’ lack of farming experience against them.  

The Court of Appeals found the district court’s award to be both equitable and practicable. Both properties would remain in the family and retain their value by staying intact. Additionally, neither party would be forced to deal with a “little odd piece somewhere.” Although the farmer argued that the new statutory provisions required that both farms be allotted to the farming sibling (essentially a court-ordered sale of the sisters’ interests to him), the Court concluded that nothing in chapter 651 envisioned that result. Lastly, the Court of Appeals denied the farmer’s request to award him a twenty-year lease on Meyer Farm because “[t]hat remedy does not appear in chapter 651.” Thus, the court affirmed the partition in kind.