                    IN THE COURT OF APPEALS OF IOWA

                                 No. 14-1622
                           Filed October 14, 2015


RUSSELL L. NEWHALL,
    Plaintiff-Appellee,

vs.

MARCIA ELAINE NEWHALL ROLL,
     Defendant-Appellant.
________________________________________________________________


      Appeal from the Iowa District Court for Hardin and Butler Counties, Gregg

R. Rosenbladt, Judge.



      Marcia Roll appeals the district court’s judgment ordering the land owned

by Roll and Russel Newhall to be partitioned by sale.       REVERSED AND

REMANDED.




      Thomas D. Hanson of Dickinson, Mackaman, Tyler & Hagen, P.C., Des

Moines, for appellant.

      Megan R. Rosenberg of Hobson, Cady & Cady, P.L.C., Hampton, for

appellee.



      Heard by Danilson, C.J., and Vogel and Tabor, JJ.
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VOGEL, Judge.

       Marcia Roll and her brother, Russell Newhall, each own an undivided,

one-half interest in two separate farm properties. Roll appeals the district court’s

judgment ordering the land be partitioned by sale and not, as Roll requested,

partitioned in kind. Roll asserts the court improperly concluded she failed to

prove the properties could be “equitably and practicably” partitioned in kind, as

set forth in Iowa Rule of Civil Procedure 1.1201(2). We conclude Roll met her

burden showing the division—in which she will receive the Butler County land,

pay Newhall $75,000, and Newhall will receive the Hardin County property—is

both equitable and practicable. Consequently, we reverse the order of the district

court and remand for entry of an order consistent with this opinion.

I. Factual and Procedural Background

       Roll and Newhall were both gifted one parcel of land in Butler County and

inherited another parcel in Hardin County, Iowa. The Butler County property is

315.3 acres and the Hardin County property is 162.93 acres.1 Although he now

resides in South Dakota, Newhall leases from his sister a portion of the Butler

County land, which was their parents’ homestead and which he has farmed for

approximately forty years.      Additionally, he placed three grain bins on the

property—making a total of five bins—which his expert valued separately, as




1
 Before trial, Roll and Newhall held a remainder interest in forty acres of the Butler
County land, subject to a life estate in their mother. After the close of testimony but
before the court issued its ruling, the mother died.
                                         3


personal property.2 A portion of the Butler County pasture land is also leased to

a third party.

       The district court described the parcels in the following manner:

               The Hardin County tract consists of just under 163 acres.
       Just over 110 of those acres are tillable. The Hardin County
       property has terraces located in the northern tillable pasture areas
       of the tract. Surface drainage is from west to east. The tillable
       acres are tiled. A creek runs through the Hardin County property.
       South of the creek the tract is steeply sloping. The slope continues
       to the west as it becomes rolling. Trees fill those rolling acres.
       Surface drainage is back towards the east and south where the
       water exits into the creek. Portions of this land could be utilized for
       residential lots as the adjoining land acres have scattered new
       building sites with dwellings.
               The Butler County tract consists of just over 315 acres.
       Almost 157 of those acres are tillable. The northern portion of the
       property is bisected by the west fork of the Cedar River. The
       southern portion of the Butler County land is also divided by an
       abandoned railroad right-of-way. There is also a building site on
       the Butler County property, with a house, grain bins, and
       outbuildings. There is a gravel driveway to the building site.
       Tillable pasture acres are located east of the building site and the
       acres along the river. Topography of the tillable acres on both
       sides of the abandoned railroad right-of-way is undulating to gently
       rolling. Surface water flows from north to south towards the railroad
       right-of-way on the acres north of the abandoned right-of way. The
       surface drainage for the tillable acres north of the building site is
       towards the river. The tillable acres accessed by county gravel
       road Dodge Avenue is higher in topography and is described as
       nearly level to undulating. Drainage is to the west and north to
       south towards the creek. The acres along the river are quite
       susceptible to flooding in years of average to above average
       rainfall.

       Newhall filed a petition for partition of property by sale regarding the

Hardin County property on March 15, 2013, and as to the Butler County property

on March 18. The two cases were later consolidated. Roll answered that the

properties should be partitioned in kind or in the alternative, that referees be

2
 Roll does not dispute this conclusion and testified she would be amenable to having
Newhall retain ownership of the bins.
                                           4


appointed to oversee a sale. Her strong preference was to retain the Butler

County property, and have the Hardin County property go to Newhall, with some

manner of equalization as to the value each would receive. Trial on the matter

was held on July 10, 2014.

       Both parties offered evidence regarding the value of the two properties.3

Newhall’s expert, Charles Wearda, valued the Butler County property at

$929,000, the Hardin County property at $778,000, and Newhall’s grain bins at

$59,000. Wearda favored a partition by sale. With regard to a partition in kind,

he testified seventy acres would need to be severed from the Butler County

property to equalize the values between the two properties.               However, to

subdivide the Butler County property in such a manner would diminish the overall

value of that property; specifically, he opined the seventy acres allocated to

Newhall would be inaccessible, due to both the lack of road access and the fact it

has a river running through it. This would force Newhall to gain an easement

from a third party neighbor and/or from Roll, through the southern portion of the

property. Additionally, Wearda stated Newhall would need to build fences to

keep any livestock on his portion of the acreage, and there would not be a

natural water source for them in the winter.

       On cross examination, Wearda conceded that, to avoid the practicability

and the diminished value of severing a portion of the Butler County land, it would

be equitable to award Newhall the Hardin County land, Roll the Butler County


3
  With respect to the experts, the district court noted: “The Court was very impressed by
the work done by each appraiser, as well as their credentials. They were both extremely
knowledgeable and experienced. The Court also found their testimony to be very
credible.”
                                         5


land, and require Roll to give Newhall an equalization payment of $75,000. This

testimony occurred in the following manner:

               Q: You [valued the land] at 4,000 bucks an acre in that 40;
       right? A: Yes.
               Q: All right. Yeah, you’ve answered the question. So if you
       took 20 acres of that 40 at $4,000 an acre in that section where the
       best access is and where you can put a fence right down through
       the middle of the hay ground, then you’ve made it even, haven’t
       you, under your calculations? A: No, because that smaller tract
       becomes an uneconomic unit for somebody to bring in that small
       number of cows, so it’s going to diminish that value of that dividing
       into much smaller tract in my opinion.
               Q: And you’re giving him extra acreage because you’re
       giving him $80,000.00 worth of ground by your appraisal as
       opposed to the 75,000 that would make it absolutely even. Now,
       that’s correct, isn’t it? A: The numbers work out that way.
               Q: In your numbers you say that Mrs. Roll in order to get
       even with her brother and if she gets to keep Butler County, owes
       him $75,000 or 75,500; right? A: That was the subtraction of
       Butler—from Butler from Hardin.
               ....
               Q: You added the two of them together, you divided them by
       half and then you subtracted what Hardin County was and it came
       to 75,500? A: All right.
               Q: All right. So that makes him even with her if she gets to
       keep Butler; right? A: By the numbers.

       Roll’s expert, Mark Gannon, opined the Butler County land was worth

$1,200,000 and the Hardin County land had a value of $620,000. Along similar

lines as Wearda, Gannon further testified that, if the land were to be partitioned in

kind, an equitable division would be for Newhall to receive the entirety of the

Hardin County property, plus the north seventy acres of the Butler County land,

with Roll to receive the remainder, which constitutes the majority of the Butler

County land. Furthermore, if Roll were to receive the entire Butler County land,

she would need to pay Newhall an equalization payment of $75,000.
                                         6


       At trial, Newhall took the position that he would be amenable to a partition

in kind if he were to receive the Butler County property:

              Q: Now, are you in agreement with [Gannon’s] proposal as it
       stands? A: No.
              Q: Now, if he were to reverse the roles and say you got a
       majority of Butler County and your sister got Hardin County, would
       you be in agreement with it then? A: Yes, I have—I have some
       grain bins on that property and operated that property; so, yeah, I
       would be in agreement with that.

       Evidence of the tax consequences, in connection with the sale of the two

properties, was also introduced.        Roll’s tax preparer, a certified public

accountant, testified a forced sale would cost Roll between $145,000 and

$164,000 in capital gains taxes. Newhall argued these tax consequences could

be avoided with a tax deferred exchange under 26 United States Code § 1031

(2013), an assertion that Roll rejected, as it would not leave her with her

requested Butler County land.

       On September 15, 2014, the district court entered its order finding Roll did

not meet her burden of showing a partition in kind would be equitable and

practicable. Specifically, it noted that a partition in kind would involve “too much

guesswork in this case.” It also dismissed the idea of having Roll pay Newhall

$75,000 in exchange for Roll keeping the entirety of the Butler County land,

because of “the widely divergent appraisals.”      Consequently, it held the two

properties should be subject to a partition by sale through a public auction,

unless the parties were to agree to another form of sale. Roll appeals.
                                         7


II. Standard of Review

       We review property disputes, which are tried in equity, de novo. Spies v.

Prybil, 160 N.W.2d 505, 507 (Iowa 1968). Though the factual findings of the

district court are persuasive, we are not bound by them. Id.

III. Partition in Kind

       Roll claims the district court improperly concluded she did not meet her

burden showing that an in-kind partition could be equitably and practicably

achieved by any of the methods her expert proposed.              She argues she

established that a partition in kind was more equitable than the sale of the land,

and that it was practicable, as both parties would have full use of their respective

land to retain or sell. Moreover, Roll noted the Hardin County property came to

the parties by inheritance, with a stepped-up basis of $560,000; however, the

Butler County property—because it was gifted during the lifetime of the

grantors—retained the grantors’ basis of $18,000. Consequently, a sale of the

Butler County property would trigger significant capital gains tax consequences.

However, if Roll were to receive and retain the Butler County property, she would

have no tax consequences and Newhall could sell the Hardin County property

with little, possibly no tax consequence because of the high basis of that

property.

       Iowa Rule of Civil Procedure 1.1201(2) states: “Property shall be

partitioned by sale and division of the proceeds, unless a party prays for partition

in kind by its division into parcels, and shows that such partition is equitable and

practicable.” The burden is on the party requesting the property be partitioned in

kind to show that such a division is equitable and practicable. Speis, 160 N.W.2d
                                         8


at 508. Our case law also counsels “that if a division in kind is impracticable, and

cannot be effected without sacrifice in value and to the best interests of all

parties, a sale will be ordered and the proceeds divided.” Nehls v. Walker, 244

N.W. 850, 851 (1932).

       A. Equity

       We agree with Roll that her proposed division of the land—in which

either (1) Newhall would receive the Hardin County property, plus seventy acres

of the Butler County property, with Roll receiving the remaining acres of the

Butler County property, or (2) Roll would pay Newhall $75,000 in exchange for

retaining the entirety of the Butler County property, with Newhall owning the

Hardin County property—is equitable. Each party would receive an equal share

of the inherited and gifted property; that is, either a partition of some of the land

or a cash equalization, which would result in an equitable allocation between

Newhall and Roll. Both experts agreed that either method would result in an

equal division of the property.    Consequently, Roll established her proposed

methods of a partition in kind would be equitable. See Iowa R. Civ. P. 1.1201(2).

       B. Practicability

       However, the record reflects that, if a partition in kind were to include a

division of the Butler County land, it would not be practicable. The reasons for

this include the fact Newhall would be required to construct fencing so as to

utilize the pasture land. Moreover, any livestock grazing on the land would not

have access to a water source during the winter unless a well was dug. The

evidence also established that the access problems would devalue the land,
                                          9


requiring Newhall to gain an easement and/or build a bridge across the river,

depending on where the division of land occurred.

       However, the solution in which Roll receives the Butler County property,

pays Newhall $75,000, and Newhall retains the Hardin County property,

circumvents these problems. Iowa Rule of Civil Procedure 1.1201(3) allows this

type of division, as it provides: “When partition can be conveniently made of part

of the premises but not of all, one portion may be partitioned and the other sold,

as provided in the rules in this division.” Iowa R. Civ. P. 1.1201(3); see also

Nehls, 244 N.W. at 851 (noting that, in a partition action, land can be both divided

and sold).

       Both Gannon and, somewhat reluctantly, Wearda, testified a payment of

$75,000 to Newhall would achieve equity, as both parties would receive one-half

of the value of the land, under either expert’s valuation. Specifically, this solution

would avoid the issue of the devaluation of the Butler County land, were it to be

allocated to Roll pursuant to Gannon’s cash proposal. Moreover, this partition

would overcome the practical issues cited by the district court and Wearda—that

is, the accessibility and use associated with a subdivision of the Butler County

land. See Nehls, 244 N.W. at 851 (concluding a partial partition was the only

equitable and practicable solution). Consequently, we agree with Roll that she

carried her burden of proof, which demonstrated that a partition in kind is both

equitable and practicable. See Speis, 160 N.W.2d at 508.
                                        10


      For these reasons, we reverse the order of the district court ordering the

sale of the land, and we remand for entry of an order consistent with this opinion.

      REVERSED AND REMANDED.

      Tabor, J., concurs; Danilson, C.J., dissents.
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DANILSON, Chief Judge. (dissenting)

          “Not me.”4 I dissent because the majority relies upon the answer to one

question by Newhall’s expert and disregards the same expert’s appraisal and

testimony that the two properties have a $580,000 differential in value.         If

Newhall’s expert is correct on the values, Roll is going to walk away with a parcel

of land having a $580,000 greater value simply by paying a minuscule sum of

$75,000.      Moreover, Newhall has been farming the Butler County parcel for

approximately forty years.         I would affirm the district court because, as it

observed, there are “widely divergent appraisals” and only a sale is equitable to

both parties. Neither party should be favored over the other owner. A sale would

equally divide any proceeds and give both parties an opportunity to bid on the

properties. Any tax consequences can be resolved through a 1031 exchange.




4
    State v. White, 587 N.W.2d 240, 247 (Iowa 1998) (Harris, J., dissenting).
