Opinion
No. 4-112 / 03-0723
May 26, 2004.
Appeal from the Iowa District Court for Linn County, William L. Thomas, Judge.
Adair Holdings, L.L.C., appeals the decision of the trial court granting summary judgment to defendants Roger Duwa, and the Guaranty Bank and Trust Company, as Trustee for the Anthony E. Schubert IRA, in its partition action. REVERSED AND REMANDED.
John Wunder, Muscatine, for appellant.
John Monroe of Titler Monroe, Cedar Rapids, for appellee.
Considered by Huitink, P.J., and Vogel and Mahan, JJ.
I. Background Facts and Proceedings
The summary judgment record includes evidence of the following. Roger Duwa purchased a home in Marion on contract. The Guaranty Bank and Trust Company, as Trustee for the Anthony E. Schubert IRA (Trustee) is the assignee of the vendor's interest in Duwa's contract.
Because the real estate taxes for 1994 through 1997 were delinquent, the Linn County Treasurer sold Duwa's home at an annual tax sale on June 21, 1999. Adair Holdings, L.L.C.'s (Adair) predecessor in interest, purchased the tax sale certificate for $2886. For reasons not entirely clear from the record, Adair agreed to accept a .00001525878% fractional interest in Duwa's property in exchange for payment of the full amount of delinquent property taxes. Adair subsequently paid additional real estate taxes on the entire parcel, investing a total of $6177.34.
Because no one redeemed the property, the treasurer issued a tax deed on May 8, 2002, to Adair for the fractional interest in the property purchased at tax sale. Shortly thereafter Adair's attorney sent Duwa a letter informing Duwa of Adair's ownership interest in the property. Duwa was also informed that he could either purchase Adair's interest, sell his interest to Adair, or alternatively, Adair would initiate a partition action which could result in the loss of Duwa's home.
On October 11, 2002, Adair filed a partition action requesting an in-kind division or sale of the real property acquired by tax deed. Adair's petition also included a prayer for general equitable relief. Duwa and the Trustee's answer and counterclaim alleged Adair's interest in the property was insignificant and requested the court quiet title to the property in his name. Duwa and the Trustee's motion for summary judgment was denied because the trial court determined there were genuine issues of fact concerning the value of the property and the equitable relief to which Adair may have been entitled. In a renewed motion for summary judgment, Duwa and the Trustee cited Adair's admission that the property was worth $53,482. The court's ruling on the renewed motion states:
Adair's pleadings here pray alternatively for the property to be divided in kind or to be sold and proceeds divided according to the parties' respective interests. Given the tiny fractional interest possessed by Adair, either alternative strikes me as absurd.
Adair contends that trial must occur so that a value can be determined. I believe the Court can take judicial notice of the fact that the property has a value of such a magnitude that the plaintiff's share that would be, if not less than one cent, at least trivial.
. . . .
I also conclude that there is no genuine dispute as to the value of the property, that is, that there is no conceivable set of facts under which the value of the property would be sufficiently large to make the plaintiff's financial interests other than trivial. There is no genuine dispute that the value of the property is far less than an amount that would generate any substantial recovery to the plaintiff.
The trial court also stated:
The letter from Adair Holdings, L.L.C., in which it, through counsel, specifically threatens Mr. Duwa with loss of his home unless he purchases Adair Holdings' interest seems to fit [the] definition of extortion perfectly. There is nothing in the nature of the partition proceeding that indicates that the defendant would lose his home, only that he would have to pay to the plaintiff some trivial amount of money to compensate them for their trivial interest.
The resulting judgment quieted title to the property in the Trustee. Judgment was also entered in favor of Adair for $.01 (one cent) plus court costs.
On appeal Adair raises the following issues:
I. The district court erred by rewarding Duwa for failing to pay his real estate taxes and further erred by punishing Adair for purchasing the parcel at tax sale.
A. Adair obtained a valid tax deed to Duwa's real property.
B. Duwa owes Adair at least the amount Adair paid Linn County to obtain the tax deed.
II. Standard of Review
We review a district court's grant of summary judgment for the correction of errors at law. Theisen v. Covenant Med. Ctr., Inc., 636 N.W.2d 74, 78 (Iowa 2001). Summary judgment is appropriate when the record, viewed as a whole, reveals no genuine issue of material fact. Id. To determine whether there is a genuine issue of material fact, we view the record in the light most favorable to the plaintiff. Id. at 79. If the facts are not in dispute, we will affirm if we determine the district court correctly applied the law. Sanford v. Manternach, 601 N.W.2d 360, 363 (Iowa 1999).
III. The Merits
Partition is defined as the division which is made between two or more persons of land, tenements, or hereditaments, or of goods and chattels which belong to them as co-owners. The term is more technically applied to the division of real estate made between coparceners, tenants in common, or joint tenants. . . .
Peterson v. Peterson, 355 N.W.2d 26, 28 (Iowa 1984) (quoting 59 Am.Jur.2d Partition § 1, at 772 (1971)). "[I]n absence of special equities, every adult tenant in common is deemed to have the absolute right to partition." Spratt v. Spratt, 456 N.W.2d 181, 183 (Iowa 1990) (citing Rosenberg v. Rosenberg, 108 N.E.2d 766, 767-68 (Ill. 1952)).
Partition actions are governed by Iowa Rules of Civil Procedure 1.201 through 1.228 (formerly rules 270 through 297). Property must be partitioned by sale and division of the proceeds unless it is equitable and practicable to divide it in kind. Iowa R. Civ. P. 1.1201(2). Although joinder of another claim or counterclaim in partition actions is generally prohibited, the court may quiet or perfect any party's title to the property or adjudicate the rights of any or all parties to all matters growing out of or connected with the property. Iowa R. Civ. P. 1.1207. A partition decree must establish the shares and interest of the owners in the property. The decree may also resolve all other matters involved. Iowa R. Civ. P. 1.1210; Baker v. Cutting, 280 N.W. 548, 550-51 (Iowa 1938) (in a partition action a court may settle and adjust rights of the parties to avoid multiplicity of litigation).
Partition is an equitable proceeding. Iowa R. Civ. P. 1.1201(1). Equity jurisdiction allows a court the necessary flexibility to determine the equities between the parties. Farmers Sav. Bank, Joice v. Gerhart, 372 N.W.2d 238, 245 (Iowa 1985). A court sitting in equity has considerable flexibility in framing a remedy. Iowa Dep't of Social Servs. v. Blair, 294 N.W.2d 567, 570 (Iowa 1980). A prayer for general equitable relief is construed liberally and will justify granting relief in addition to that contained in a specific prayer if it fairly conforms to the case made by the petition and the evidence. Dearinger v. Peery, 387 N.W.2d 367, 371 (Iowa Ct. App. 1986) (quoting Moser v. Thorp Sales Corp., 312 N.W.2d 881, 895 (Iowa 1981)); see also Jorge Constr. Co. v. Weigel Excavating Grading Co., 343 N.W.2d 439, 441-42 (Iowa 1984) (stating prayers for general equitable relief are liberally construed).
As noted above, Adair purchased the property at a tax sale and received a tax sale certificate from the Linn County Treasurer. The person who offers to pay the total amount due for the smallest percentage of the parcel at a tax sale is granted an undivided interest upon receipt of a treasurer's deed pursuant to Iowa Code chapter 448. Iowa Code § 446.16 (2001). The purchaser of a tax sale certificate acquires no legal title to the property purchased until the treasurer issues a deed. Currington v. Black Hawk County, 184 N.W.2d 675, 676 (Iowa 1971). The purchaser may pay the taxes as they become due for years subsequent to the sale, and the amounts so paid are added to the owner's cost of redemption. Iowa Code §§ 445.1, 446.32. The purchaser may also recover taxes paid in good faith for years subsequent to the tax sale if the title obtained through a tax deed is later invalidated. Stewart v. Corbin, 38 Iowa 571, 572 (1874).
A treasurer's deed "vest[s] in the purchaser all the right, title, interest, and claim of the state and county to the parcel, and all the right, title, interest, and estate of the former owner in and to the parcel conveyed." Iowa Code § 448.3; City of Muscatine v. Northbrook P'ship Co., 619 N.W.2d 362, 366 (Iowa 2000); see also Patterson v. May, 239 Iowa 602, 610-11, 29 N.W.2d 547, 552 (1947) (stating a valid tax deed extinguishes prior interest in property). The consideration for the interest in the property so acquired is the delinquent taxes paid. See, e.g., Jenswold v. Doran, 77 Iowa 692, 693, 42 N.W. 465, 465 (1889).
Prior to the tax sale, Duwa, as contract purchaser, held equitable title to the property and the Trustee, as the contract sellers' assignee, held legal title as security for Duwa's performance of the contract. See Pierce v. Farm Bureau Mut. Ins. Co., 548 N.W.2d 551, 555 (Iowa 1996) (explaining concept of equitable conversion resulting from contract for the sale of real estate). Upon issuance of the tax deed on May 8, 2002, Adair acquired the earlier described fractional undivided legal and equitable interest in the property. Contrary to Adair's argument, we do not believe the tax deed extinguished either Duwa's or the Trustee's interest in the remaining fractional ownership of the property. See, e.g., Jenswold, 77 Iowa at 693, 42 N.W. at 465. Any other conclusion ignores the smallest fractional interest language of section 446.16. As a result, from and after issuance of the tax deed, Adair, Duwa, and Trustee owned their respective legal and equitable interests in the property as tenants in common. See Van Veen v. Van Veen, 213 Iowa 323, 333-34, 238 N.W.2d 718, 723 (1931) (defining tenants in common as such as hold property "by several distinct titles, but by unity of possession").
As a tenant in common, Adair had an absolute right, absent special equities, to partition the property. Iowa R. Civ. P. 1.1201; Spratt, 456 N.W.2d at 183. The remaining question is whether the circumstances cited by the trial court, i.e. Adair's extortionate motives and the trivial value of its interest, constitute special equities precluding Adair's absolute right of partition. Adair denies any extortionate motive, arguing that the trial court's judgment was gratuitously punitive and based on a failure to credit Adair for property taxes which it was legally entitled to recover. We agree.
Adair, as a tenant in common, by virtue of its tax deed, is entitled to contribution from co-tenants Duwa and the Trustee for property taxes paid on the entire parcel after issuance of the tax deed. Van Veen, 213 Iowa at 333-34, 238 N.W. at 724. Adair's right of contribution does not, however, include the amount of taxes paid at the tax sale. Adair acquired its fractional interest by virtue of a valid tax deed, and has therefore received the benefit of the consideration paid at the tax sale. In other words, Adair got what it paid for. Adair cannot have it both ways. Adair is not entitled to both contribution for the amount of taxes paid at the tax sale and the fractional interest in the property acquired in exchange for that payment. We reject Adair's contrary argument based on its interpretation of the court's holding in Hintrager v. McElhinny, 112 Iowa 325, 332-33, 82 N.W. 1008, 1010 (1900). Hintrager is distinguishable because in that case, the purchaser recovered the delinquent taxes paid at the tax sale because the tax deed was later declared invalid. Id. There, the purchaser did not get what he paid for.
We also conclude, for reasons of equity, that Adair is entitled to recover real estate taxes paid pursuant to Iowa Code section 446.32 for years subsequent to the tax sale but before the tax deed was issued. Unlike the taxes paid at the tax sale, the amounts so paid were not part of the consideration for Adair's fractional interest in the property. Equity would not be served by denying Adair the right to recover these amounts and allowing Duwa and the Trustee the windfall resulting from the trial court's judgment denying Adair recovery of these amounts. In the absence of more attentive advocacy, we do not reach the question of Adair's entitlement to statutory interest or penalties, leaving that determination instead to the trial court after the parties have had an opportunity to litigate those issues.
When Adair is properly credited for the taxes paid for the years after the tax sale, the value of its interest in the property is more than trivial. Moreover, the underlying premise of the trial court's conclusions concerning Adair's extortionate motive is no longer valid because it was based on the assumption that Adair's interest in the property was trivial. We conclude that the circumstances cited by the trial court in support of its ruling granting summary judgment do not constitute special equities precluding Adair's right to partition the property. Duwa and the Trustee were not entitled to judgment as a matter of law, and the resulting judgment must therefore be reversed and the case remanded to the trial court for further proceedings in conformity with our opinion.