Iowa Court Says Landlord Failed to Prove Oral Crop Share Agreement

August 13, 2015 | Kristine A. Tidgren

Peck v. Four Aces Farms, Inc., 2015 Iowa App. LEXIS 696 (Iowa Ct. App. Aug. 5, 2015)

“My handshake is my word” is an admirable philosophy. We should all hope to deal with people true to their word. Even when uttered with the greatest sincerity, however, “my handshake is my word” is not an admirable approach to business.  Unfortunately, it’s not always clear what “my word” is, even when two honest parties are involved. A recent opinion from the Iowa Court of Appeals illustrates the necessity for a well-drafted, written lease with an integration clause. As many landowners and tenants look to renegotiate leases this fall, we cannot overestimate the importance of a well-drafted, written lease that memorializes all of the parties’ intentions.


The plaintiff was a retired farmer and businessman who farmed his 690 acres of farmland himself until leasing it to the defendant in 2007. The parties entered into a written lease which provided that the defendant would pay the plaintiff $195 per acre, with $67,226 due on March 1 and $67,226 due on December 1. The lease also specified that the defendant would pay $.10 per bushel to rent storage bins and that the plaintiff would provide “3 tons of chicken litter at the rate of $20 per ton” to the defendant.

During the first summer covered by the lease agreement, the parties’ agents discussed the fact that crop prices were rising and that the plaintiff would be requiring “more money” if the defendant wished to retain the property. The defendant’s agent testified that he told the plaintiff he would pay him “some type of bonus.”

In September 2008, after the 2007 harvest had been sold, the defendant paid plaintiff a “bonus” of $61,252. Along with the “bonus,” the defendant gave the plaintiff a detailed accounting showing how the payment had been calculated. Specifically, the accounting reflected that the bonus was half of the “shared income” from the property. This was half of the gross income minus shared expenses reduced by the rental payments the defendant had already paid to the plaintiff. The defendant’s agent testified that he chose the calculation method to be “fair” and to ensure that the plaintiff would continue to rent his property to the defendant in future crop years. The plaintiff testified that the bonus was calculated in accordance with a “50-50 agreement” the parties had reached.

The parties signed a new written lease for the 2008 crop year. The provisions were nearly identical, but the rent increased to $200 per acre. After the 2008 grain was marketed, the defendant presented the plaintiff with a “bonus” payment of $27,497. The defendant’s agent again provided a detailed accounting, using the same method as he had the previous year. He testified that he made this payment to “maintain good relations” so that the defendant could “continue to rent the property.” The plaintiff testified that this payment, too, was pursuant to an oral agreement requiring the defendant to share profits with the plaintiff.

The parties signed a new lease for the 2009 crop year. The plaintiff received no bonus in 2010 because the 2009 crop did not generate a profit. The plaintiff testified that this was in accordance with the oral agreement. The written lease, he alleged, provided the minimum amount that the defendant had to pay and that the oral profit sharing agreement continued.

The defendant continued to rent the property for the 2010 and 2011 crop years, but the parties did not execute a new written lease. The parties’ relationship began to sour in 2011, but the plaintiff did engage the defendant that year to farm an additional 61.7 acres of ground owned by his wife (due to the fact that the plaintiff became ill). The parties did not sign any contract for this additional ground.

In August of 2011, the plaintiff sent a notice to the defendant terminating the rental relationship for the 2012 crop year.  In the fall, the defendant prepared an accounting for the 2010 crop year and offered to pay the plaintiff $19,218 as a bonus payment. The plaintiff refused to accept the payment, arguing that it was not “calculated proper” and was not “honest per our agreement.”

In November of 2011, the plaintiff sent a letter to the defendant, stating that the defendant was not to market the plaintiff’s 2011 grain without the plaintiff’s permission. The plaintiff then filed a financing statement to perfect his landlord’s lien.

In response, the defendant’s attorney sent the plaintiff a letter and four checks. Two of the checks fulfilled the defendant’s remaining cash rent obligations under the written lease and two of the checks were payments for storage. The letter alleged that the plaintiff had violated the defendant’s rights under the lease and under Iowa Code §562.5A by chopping and chiseling the corn stocks. The letter also stated that the defendant “had performed all obligations under the farm lease between the parties.”

The plaintiff’s attorney returned the checks to the defendant’s attorney, with a letter stating that the parties were operating under an agreement where the defendant was farming the plaintiff’s “land on a 50/50 crop share basis with a minimum of $200 per acre.”

At the request of the plaintiff’s attorney, the defendant’s attorney sent a “summary of profitability” for the 2011 year. The defendant, however, did not offer a bonus payment for the 2011 crop year.

District Court

In March of 2012, the plaintiff filed a petition for declaratory judgment and for accounting against the defendant. The plaintiff alleged that the parties’ written lease was not the full agreement between the parties and that the defendant owed the plaintiff money pursuant to the parties’ oral “50/50 crop share lease.”

The defendant denied the existence of an oral agreement and filed a counter-claim seeking damages for the lost value of the unharvested corn stover.

The district court issued a judgment in favor of the plaintiff, finding that an oral crop share agreement supplemented the parties’ written lease. Although determining that the plaintiff owed the defendant $10,214.50 for the defendant’s share of the unharvested stover, the district court entered judgment in the amount of $204,072.08 for the plaintiff.

Iowa Court of Appeals

The Iowa Court of Appeals severely curtailed that award. On review, the court first agreed that the district court had properly considered parol evidence of the alleged 50/50 agreement. The court found that the “skeletal” written lease did not contain an integration clause or an expression of many terms typically included in a farm lease. The court thus found that the “totality of the evidence” suggested that the “vague” written lease was not the “entire agreement” between the parties.

After a review of the parol evidence (or the evidence external to the written lease), the court concluded that the plaintiff had failed to establish by clear, satisfactory and convincing proof that an oral 50/50 crop share agreement was ever reached between the parties. The court concluded that the prior payments made by the defendant to the plaintiff were mere “bonuses” and that the parties had no “meeting of the minds” as to a formal 50/50 agreement. The plaintiff referenced no conversation he had with defendant to support his belief that they were operating under a “50/50 crop share agreement.” Agents of the defendant, on the other hand, testified as to conversations with plaintiff in which they had stated that the bonus was “discretionary.” The bonus was paid, they stated, to ensure the defendant’s future ability to rent the ground.

The court agreed that the defendant was entitled to the value of the corn stover. Because the court found there was no crop share agreement, the court awarded the defendant the full value of $20,429.

After performing its analysis, the court reduced the plaintiff’s net judgment to $80,548.70, the value of the amounts due under the written lease offset by the amount due to the defendant for the value of the corn stover. Because the defendant’s prior offer of amounts due under the contract was conditional, the count ruled that plaintiff was entitled to interest.


This was a difficult case. A ruling that the written lease was the full expression of the parties’ intent would have been clean. However, the court found that was not the case. There was no integration clause in the barebones written lease, and the terms were ambiguous. Consequently, the court had to engage in an analysis of what the parties recalled about their conversations relating to any separate oral agreement. Interestingly, the opinion does not discuss the standard cash rental rates for similar farms. There is no analysis of whether the $200 rent agreed to in the written lease was in accord with typical cash rent leases. USDA records reveal that the average cash rental rate for 2011 in Poweshiek County was $226 an acre. That average rate bumped to $275 per acre in 2012. The “bonus” amount offered by the defendant and refused by the plaintiff for the 2010 crop year would have increased the defendant's "rent" by $27.85 per acre.

Because this is a fact-intensive case, it is impossible to deduce the parties’ full intent by reading the court opinion. It was likewise impossible for the court to determine the parties’ full intent with any certainty by reading the trial transcript. These cases put courts in unenviable positions. Without a writing, the party seeking to prove an oral agreement must prove it by clear and convincing evidence. Here that standard was not met.

The takeaway from this case is that a handshake is not enough. Although parties can operate successfully with no problems for years, a small ripple in a relationship can unleash years of litigation. The cost and work to properly memorialize an agreement is certainly a worthwhile investment. If you have any doubts, read the full court opinion.