Iowa Supreme Court Nixes Partition in Kind
The Iowa Supreme Court recently provided an excellent overview of the rules governing the partition of concurrently owned property in Iowa. In reversing a court of appeals decision ordering a partition in kind, the Court reiterated that Iowa law favors partition by sale. In the case before it, the Court ruled that the party seeking an in-kind division had not established that such a split would be both equitable and practicable.
The parties were biological siblings (a brother and a sister) who owned two separate farm properties as tenants in common. In 2006, the parties received the Butler County “home place,” via inter vivos gift, from their parents. In 2011, the parties received a tract located in Hardin County through a testamentary gift from their biological aunt. The Butler County tract consisted of 315 acres, 115 of them tillable and the rest pasture and hay ground. The brother’s expert appraised the Butler County land at $929,000, and the sister’s expert appraised it at $1.2 million.
The Hardin County property consisted of 162.92 acres, of which 110 was tillable and the rest pasture. The brother’s expert appraised the Hardin County land at $778,000, and the sister’s expert appraised it at $620,000.
The brother filed an action seeking a partition by sale of both properties. The sister opposed the proposal and asked the court to order a partition in kind. She asked the court to award the Hardin County property to the brother and the Butler County property to her. She lived nearby the Butler County farm and claimed a strong emotional tie to the land. Because the Butler County land was worth more than the Hardin County land, the sister proposed that she either make an equalization payment to the brother or give him 70 acres of pasture and hay ground from the Butler County tract. The brother reasserted his preference for a partition by sale, but argued that if a partition in kind were ordered, he should get the Butler County property. The brother had farmed the tillable portion of the Butler County land since 1974, although he primarily farmed and raised cattle in North Dakota. The brother owned several grain bins and a grain dryer on the Butler County property.
The district court ruled that the sister had not met her burden to show that the partition in kind would be equitable and practicable. The district court ruled that awarding a portion of the Butler County property to the brother to equalize the division would diminish the aggregate value of the Butler County tract. The court also noted that the two tracts carried substantially different tax bases. The Butler County tract had been gifted by the parents while they were living. Consequently, the tax basis on that property was very low. By contrast, because the Hardin County property was a testamentary gift, the parties received the property with a stepped-up basis at 2011 fair market value. The district court stated that the differing tax bases of the properties also complicated any efforts to equitably divide the properties in kind.
Iowa Court of Appeals
On appeal, however, the Iowa Court of Appeals reversed, finding in a split decision that it was both equitable and practicable to award the brother the Hardin County tract, the sister the Butler County tract, and the brother an equalization payment of $75,000. The brother appealed, and the Iowa Supreme Court agreed to hear the case.
Iowa Supreme Court
Iowa's Partition Law
The Court began its opinion with an overview of the legal principles governing partition actions in Iowa. Such actions, the Court explained are governed by Iowa Code §§ 651.1– 651.6 and Iowa Rs. Civ. P. 1.1201–1.1228. The statutory provisions and the procedural rules establish a “rough legal blueprint” for partitioning concurrently owned property. The Court then noted that Iowa law, unlike the law from the vast majority of other states, is “unequivocal in favoring partition by sale.” An objecting party, the Court explained, has the burden to show why this should not be done in a particular case.
Specifically, under Iowa R. Civ. P. 1.1201, a co-owner of property may request a judicial partition of the property either: (1) by sale or (2) in kind. With a partition by sale, the property is sold and the sale proceeds are distributed to the parties. With a partition in kind, the property is divided into parcels, and the parcels are allotted to the parties by share. Under Iowa R. Civ. P. 1.1201(2), the party seeking a partition in kind has the burden to prove it would be both equitable and practicable. Iowa R. Civ. P. 1.1216 also provides that “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.”
The Court also reviewed several well-established limitations on in-kind partitions in Iowa. In-kind partitions are never appropriate if:
- A division into separate parcels would depreciate their aggregate value OR
- It is impracticable and cannot be effected without sacrifice in value and to the best interest of all parties
The Court then analyzed the sister’s two proposals in the light of these applicable legal principles. The Court first found that her proposal to provide the brother with a 70-acre tract from the Butler County property to equalize the value received by each party was both impractical and inequitable. The Court ruled that the sister did not overcome evidence presented by the brother that separating the pasture and hay ground from the larger tillable Butler County parcel would diminish the value of the pasture ground and make it less suitable for raising livestock. The Court also rejected the second alternative under which the sister proposed to give the brother a cash equalization payment to make her receipt of the Butler County property and his receipt of the Hardin County property fairer. Labeling the proposed cash payment as “owelty,” the Court “saved for another day” the question of whether Iowa recognizes the doctrine of owelty. Rather, the Court held that, under the circumstances of the case before it, the sister had not shown a superior claim of entitlement to the Butler County farm. Although the sister lived near the farm and the brother lived in North Dakota, the brother had maintained an “intimate connection” to the property by continuing to farm it. The Court recognized that while the sister’s connection to the farm was “sincere and profound,” it could not say that her interest was measurably superior to that of her brother.
The Court thus affirmed the district court’s decision, paving the way for the properties to be divided by sale.
This case, Newhall v. Roll, No. 14-1622 (Iowa Sup. Ct. Dec. 23, 2016), provides a great resource for parties seeking a review of Iowa law governing the partitioning of real or personal property.
As a side note, on the same day, the Iowa Supreme Court decided a second case involving the same brother and sister. In Roll v. Newhall, No. 15-1838 (Iowa Sup. Ct. Dec. 23, 2016), the Court ruled that the brother was still entitled to inherit under his mother's will, even though after the execution of the will (but before his mother's death), the brother was adopted by his paternal aunt. In reaching its decision, the Court relied upon the fact that the will had identified the brother both by name and by membership in a class (children).
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