Iowa Supreme Court Says No Time Limit for Boundary by Acquiescence Claim Where Property Transferred from a Trust

Iowa has a new rule when it comes to boundary by acquiescence and property transferred from a trust. In a rare reversal of precedent, the Iowa Supreme Court overruled Heer v. Thola, 613 N.W.2d 658 (Iowa 2000) (en banc) to find that boundary by acquiescence claims are not cut off by the one-year limitations period for bringing claims arising from the transfer of property by a trustee. 614.14(5)(b). This ruling eliminates a barrier that has preempted some boundary by acquiescence claims for 24 years. Vaudt v. Wells Fargo Bank, No. 23-0482 (Iowa Sup. Ct. March 8, 2024).

Appellants purchased their home in August of 1991 and have lived there ever since. In 2001, they created a landscape barrier along the east border of their property that included trees, bushes, and mulch. They hired professionals to maintain the elaborate landscaping. In May of 2021, the appellees purchased, through a trustee’s deed, the residential property next door to the appellants. The deed was recorded on June 3, 2021. The appellees had their property surveyed shortly after the purchase because they wanted to install a swimming pool and fence. The survey revealed that the appellants’ landscaping was encroaching on the appellees’ property by 22 feet. When the appellees notified the appellants of the issue, the appellants filed an action to quiet title, alleging boundary by acquiescence and adverse possession.

Applicable Law

Boundary by acquiescence “is the mutual recognition by two adjoining landowners for 10 years or more that a line, definitely marked by fence or in some manner, is the dividing line between them.” Sille v. Shaffer, 297 N.W.2d 379, 381 (Iowa 1980); see also Iowa Code § 650.14. A claim for adverse possession establishes ownership in property if the claimant can “show hostile, actual, open, exclusive and continuous possession, under claim of right or color of title for at least ten years.” Nichols v. Kirchner, 40 N.W.2d 13, 16 (Iowa 1949). A claim for adverse possession or boundary by acquiescence arises if the stated conditions exist for 10 years. There is no stated limitations period for bringing an action for claims arising under these rules.  

District Court Ruling

Wells Fargo—the holder of the appellees’ mortgage—filed a motion to dismiss the claims as barred by the one-year statute of limitations in Iowa Code § 614.14(5)(b), which applies to actions that arise out of transfers of property by a trustee.  Relying on the precedent of Heer v. Thola, the district court dismissed the action. Appellants asked the Iowa Supreme Court to review the case.

Supreme Court Ruling

On review, the Supreme Court agreed that the case was controlled by Heer, where the plaintiffs filed an action seeking to establish a boundary by acquiescence against their neighbors. The defendant in Heer claimed that the action was barred by the one-year limitations period in § 614.14(5)(b) because the plaintiffs filed their action more than one year after the defendant acquired the property from a trustee’s deed. The plaintiffs argued that §614.14(5) did not apply because their claim did not “arise by reason of a transfer” by a trustee. The Supreme Court at the time sided with the defendant, stating, “If it had not been for the trustee’s deed, this case would never have arisen. We hold the [plaintiffs’] claim ‘ar[ose] . . . by reason of’ the trustee’s deed and was therefore barred at the time they filed their claim.”

Iowa Code section 614.14(5)(b) states:

An action based upon an adverse claim arising on or after January 1, 2009, by reason of a transfer of an interest in real estate by a trustee, or a purported trustee, shall not be maintained either at law or in equity, in any court to recover or establish any interest in or claim to such real estate, legal or equitable, against the holder of the record title to the real estate, legal or equitable, more than one year after the date of recording of the instrument from which such claim may arise. (emphasis added).

In the case at hand, the appellants argued that the Heer holding violated the plain language of the statute and should be overruled. While recognizing that “stare decisis is a ‘venerable doctrine’ that requires ‘the highest possible showing that a precedent should be overruled before taking such a step,’” the Court agreed with the appellants and overruled Heer.

In reaching this decision, the Court focused on the first sentence of the statute finding that “it applies only to those ‘adverse claim[s] arising …, by reason of a transfer’ of the real estate by the trustee.” All members of the Court agreed that the appellants’ claim did not arise from the trustee’s transfer of the deed to the appellees. In contrast to the holding of Heer, the Court found that the statute required a connection between the claim and the trustee’s transfer, not merely between the “case” and the trustee’s transfer. The Court found that this one-year limitation was clearly intended to apply to claims specifically arising “by reason of” the trustee’s transfer, such as claims concerning the trustee’s affidavit, their authority to transfer, or homestead rights triggered when a homestead is conveyed.

By contrast, the Court explained that a boundary-by-acquiescence claim arises from the conduct and consent of two adjoining property owners. “That one of the adjacent properties is subsequently transferred by a trustee’s deed simply has no relevance to the elements of the claim,” the Court stated.

The Court also rejected Wells Fargo’s argument that the statute was a title-clearing statute intended to specially protect transfers by trustees. The Court explained that instead of applying generally to all actions, § 614.14(5) applies more narrowly to “[a]n action based upon an adverse claim arising … by reason of a transfer of an interest in real estate by a trustee.” Other title-clearing statutes are based solely on the passage of time. Here, the claims barred are specifically limited.

Based upon its analysis, the Court held that Heer had wrongly interpreted the plain language of § 614.14(5). It thus overruled Heer “to the extent it held the statute of limitations in section  614.14(5)(b) applies to claims like the [appellants’], which arose from events unrelated to the neighboring property’s transfer by trustee’s deed.”

The Court remanded the case the district court, where the court will determine whether the appellants can establish their claims.

Dissent

Although he agreed that Heer was wrongly decided, Justice McDonald dissented from the portion of the opinion overruling Heer, stressing the importance of stare decisis. He wrote, “Even assuming Heer was manifestly erroneous, palpably erroneous, demonstrably erroneous, clearly erroneous, etc., I cannot conclude that Heer is one of the rare statutory precedents that should be overruled.” Even so, Justice McDonald stated that he would not extend Heer to bar the appellants’ adverse possession claim.

Iowa has a new rule when it comes to boundary by acquiescence and property transferred from a trust. In a rare reversal of precedent, the Iowa Supreme Court overruled Heer v. Thola, 613 N.W.2d 658 (Iowa 2000) (en banc) to find that boundary by acquiescence claims are not cut off by the one-year limitations period for bringing claims arising from the transfer of property by a trustee. 614.14(5)(b). This ruling eliminates a barrier that has preempted some boundary by acquiescence claims for 24 years. Vaudt v. Wells Fargo Bank, No. 23-0482 (Iowa Sup. Ct. March 8, 2024).