Amended April 25, 2016 John Gansen and Elaine Bries, as Trustees of the Frances A. Gansen Declaration of Trust v. James B. Gansen ( 2016 )

IN THE SUPREME COURT OF IOWA
No. 14–2006
Filed January 22, 2016
Amended April 25, 2016
JOHN GANSEN and ELAINE BRIES, as Trustees of the FRANCES A.
GANSEN DECLARATION OF TRUST,
Appellees,
vs.
JAMES B. GANSEN,
Appellant.
Appeal from the Iowa District Court for Dubuque County,
Richard D. Stochl, Judge.
A lessee appeals a district court ruling on the validity of an
agricultural lease under the Iowa Constitution. AFFIRMED.
Andrew B. Howie of Hudson, Mallaney, Shindler & Anderson, P.C.,
West Des Moines, D. Flint Drake and Samuel M. Degree of Drake Law
Firm, P.C., Dubuque, for appellant.
Richard W. Kirkendall and Stephen J. Juergens of Fuerste, Carew,
Juergens & Sudmeier, P.C., Dubuque, for appellees.
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APPEL, Justice.
In this case, we consider a dispute regarding a lease of land used
for agricultural purposes. The substantive legal question presented by
the parties is whether the terms of two five-year leases—which
automatically self-renewed for four additional five-year terms unless the
tenant unilaterally opted out of the lease—offend article I, section 24 of
the Iowa Constitution. Article I, section 24 of the Iowa Constitution
provides that no lease of agricultural lands “shall be valid for a longer
period than twenty years.” The district court concluded that to the
extent the leases permitted Gansen to continue to lease the property
beyond twenty years, the leases violated article I, section 24. Gansen
appealed.
Before reaching the substantive legal question, however, we must
consider whether the landlord’s claim that the leases violated article I,
section 24 is barred under principles of claim preclusion arising as a
result of prior litigation between the parties involving the same
agricultural leases.
For the reasons expressed below, we conclude that claim
preclusion does not apply to bar the landlord’s constitutional claim in
this case. On the merits, we agree with the district court that the leases
violate article I, section 24 of the Iowa Constitution to the extent they
remain in effect after the passage of twenty years from their inception.
I. Background Facts and Proceedings.
A. The Leases. Frances Gansen created the Charles Gansen
Trust (Trust) in December of 1996. The Trust received two tracts of farm
land of 120 and 80 acres respectively. The Trust then entered into
identical leases with James Gansen (James) for the two tracts
commencing on March 1, 1997.
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The leases provided an initial term of five years. Each lease,
however, contained an “option to renew.” The option to renew provided:
This lease shall automatically renew for four additional 5-
year terms unless Tenant provides notice to Landlord in
writing not less than 180 days before the termination of the
then current lease term, or within 30 days of the
commencement of the new lease term, with tenant’s election
not to lease the leased property for any such additional five
year term. In the event the lease term is extended pursuant
to this paragraph, in all respects the lease shall continue
upon the same terms and conditions provided for herein.
The leases also contained a provision related to potential rent
adjustment. Specifically, the leases stated,
[T]he annual rental due shall be adjusted each year by the
mutual agreement of the parties. If the parties do not
mutually agree to such adjusted rental on or before August 1
of any such year, the rental for the previous year shall apply.
Between 1997 and 2007, James rented the two farms from the Trust for
$120 per acre.
B. First Round of Litigation. Beginning in 2007, however, the
trustee unsuccessfully attempted to negotiate a higher rent from James.
After unsuccessful negotiations, the trustee launched the first round of
litigation between the parties in 2009.
The trustee filed a declaratory action against James in three
counts. Count I asserted that while the leases called for annual
reconsideration of the rental rate, James had refused to cooperate in
good faith. As a result, the trustee sought a declaration that James was
in breach of the lease. In Count II, the trustee asserted that even if
James was not in breach of the lease, the court should determine a fair
rental for the lease for the year beginning March 1, 2009. Count III
asked the court to conclude the leases terminated as of March 1, 2009,
for failure of the parties to include a material term in the lease
4
agreement. James filed a series of counterclaims raising issues not
germane to this appeal. See In re Gansen, No. 12–0106, 2012 WL
5954584, at *3 (Iowa Ct. App. Nov. 29, 2012).
The district court held pursuant to Count I that James had
unreasonably refused to negotiate a reasonable rental rate, but it
declined to hold that his refusal to do so constituted a breach of the
agreement. With respect to Count II, the district court proceeded to
establish what it saw as a fair rental rate for the property. On Count III,
the court declined to declare that the leases terminated on March 1,
2009. Id. at *5–6.
James appealed. The court of appeals modified the district court’s
finding by determining that rent was due only on tillable acres, but it
otherwise affirmed the judgment of the district court. Id. at *14.
C. Second Round of Litigation. Once again, the trustee and
James could not arrive at an agreement for reasonable rental for the crop
year commencing March 1, 2013. The trustee again filed what it styled a
petition for declaratory action in November 2013.
Count I alleged that James had breached his duty of good faith by
refusing to negotiate a reasonable rent and asked the court to declare
reasonable rental rates for 2013 and successive years based upon the
annual Iowa State University Cash Rental Rates Survey. In Count II, the
trustee alleged that the leases violated the limitation of article I, section
24 of the Iowa Constitution. Count III alleged the court should declare
that each of the leases was terminated pursuant to provisional notices of
termination filed by the trustee on James.
James filed an answer and counterclaim. In his counterclaim,
James alleged that the petition was frivolous. In addition, James
5
claimed Counts II and III of the petition were barred by the doctrine of
res judicata.
The trustee moved for partial summary judgment on the ground
that the leases violated article I, section 24 of the Iowa Constitution. The
trustee asserted that, as a matter of law, the leases must terminate
twenty years after their effective date, namely, on February 28, 2017.
James opposed the motion, in part on res judicata grounds.
The district court granted the motion, finding that the leases
violated article I, section 24 of the Iowa Constitution. The district court
did not expressly address, however, the res judicata defense raised by
James. James filed a motion to enlarge or amend findings. In his
motion, James argued that the trustee’s action was barred by
res judicata. James also asked the district court to reconsider its ruling
on the article I, section 24 issue. The district court denied the motion to
enlarge. James appealed.
II. Standard of Review.
We review summary judgment rulings for correction of errors at
law. Baker v. City of Iowa City, 867 N.W.2d 44, 51 (Iowa 2015).
Summary judgment is appropriate when “there is no genuine issue as to
any material fact and . . . the moving party is entitled to a judgment as a
matter of law.” Iowa R. Civ. P. 1.981(3); Dolphin Residential Coop., Inc. v.
Iowa City Bd. of Review, 863 N.W.2d 644, 647 (Iowa 2015).
III. Application of Claim Preclusion.
A. Positions of the Parties. James argues that the trustee is
precluded from bringing an article I, section 24 claim in the second
round of litigation between the parties. James asserts that res judicata
has three elements: (1) the parties in the first and second action are the
same, (2) the claim in the second suit could have been fully and fairly
6
adjudicated in the first suit, and (3) there was a final judgment on the
merits. Spiker v. Spiker, 708 N.W.2d 347, 353 (Iowa 2006). He
emphasizes that under our caselaw, the second claim is likely to be
barred by claim preclusion when the “acts complained of, and the
recovery demanded are the same or where the same evidence will
support both actions.” Arnevik v. Univ. of Minn. Bd. of Regents, 642
N.W.2d 315, 319 (Iowa 2002) (quoting Whalen v. Connelly, 621 N.W.2d
681, 685 (Iowa 2000)). Applying these principles, James argues that the
trustee could have brought the article I, section 24 claim in the prior
litigation, that the recovery demanded (i.e., termination of the leases) is
the same, and that the same evidence supports both this action and the
prior action.
The trustee asserts that the claims are different and that they are
based upon different underlying facts. The trustee argues the earlier
claims were based upon James’s failure to negotiate rent in good faith for
rent in 2009, resulting in the trial court entering a rental rate for the
years from March 2009 through March 2013. The second round of
litigation, according to the trustee, was based upon failure to negotiate
reasonable rent for the crop year beginning on March 1, 2014.
The trustee further asserts that the doctrine of res judicata cannot
apply to cases involving article I, section 24 of the Iowa Constitution.
According to the trustee, res judicata cannot apply to extend a lease term
beyond the twenty-year prohibition in the Iowa Constitution. The trustee
argues that no court should enforce the terms of an illegal contract.
B. Application of Claim Preclusion to Claim in This Case
Under Article I, Section 24 of the Iowa Constitution. We first
consider whether the doctrine of claim preclusion applies under the
circumstances of this case. Here, the parties are identical, there is no
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doubt that the article I, section 24 claim could have been brought in the
prior proceeding, and there was a final judgment on the merits in the
first action. Arnevik, 642 N.W.2d at 319. Further, no additional
evidence would have been required to litigate the constitutional question
in the first proceeding, in contrast to our other cases allowing parties to
litigate separate claims involving the same contract in two proceedings.
See Westway Trading Corp. v. River Terminal Corp., 314 N.W.2d 398, 401
(Iowa 1982) (holding claim preclusion did not foreclose plaintiff’s second
action even though it arose out of the same lease agreement as that of a
prior action).
Although not raised by the parties, there is a substantial question
as to whether claim preclusion applies in a second action when the first
action between the parties is a declaratory action. The Restatement
(Second) of Judgments, section 33 provides:
A valid and final judgment in an action brought to declare
rights or other legal relations of the parties is conclusive in a
subsequent action between them as to the matters declared,
and, in accordance with the rules of issue preclusion, as to
any issues actually litigated by them and determined in the
action.
Restatement (Second) of Judgments § 33 (Am. Law Inst. 1982)
[hereinafter Restatement (Second)].
The rationale for declining to apply claim preclusion to declaratory
judgment actions is straightforward. The purpose of declaratory actions
is to provide a fast and relatively simple way to declare the rights of the
parties before a situation festers or damages accumulate. See
Restatement (Second) § 33 cmt. c (“A declaratory action is intended to
provide a remedy that is simpler and less harsh than coercive relief
. . . .”). By requiring joinder of additional claims, what was originally a
relatively simple and straightforward action can become much more
8
complicated. A requirement of joinder of claims might therefore deter the
effective use of declaratory actions. See generally Elizabeth L. Hisserich,
The Collision of Declaratory Judgments and Res Judicata, 48 UCLA L.
Rev. 159, 159–63 (2000).
Further, many declaratory actions are brought early in a potential
dispute before the parties get invested in their positions. As noted by
Edson R. Sunderland, the difference between a declaratory action
declaring rights and a coercive action is the difference “between
diplomacy and war.” Edson R. Sunderland, A Modern Evolution in
Remedial Rights—The Declaratory Judgment, 16 Mich. L. Rev. 69, 76
(1917) [hereinafter Sunderland]. The declaratory judgment vehicle allows
parties to obtain the intervention of the court to resolve their differences
and assist in the structuring of their affairs “before the danger has
ripened into catastrophe.” Edwin Borchard, Declaratory Judgments 21
(2d ed. 1941); see also Sigal v. Wise, 158 A. 891, 893 (Conn. 1932).
Most state and federal courts applying state law have adopted the
position of section 33 of the Restatement—namely that issue preclusion,
but not claim preclusion, arises from declaratory actions. See, e.g.,
Jackinsky v. Jackinsky, 894 P.2d 650, 656 (Alaska 1995); Bankers &
Shippers Ins. Co. of N.Y. v. Electro Enters., Inc., 415 A.2d 278, 284–85
(Md. 1980); Radkay v. Confalone, 575 A.2d 355, 357–58 (N.H. 1990);
State ex rel. Shemo v. Mayfield Heights, 765 N.E.2d 345, 355 (Ohio 2002);
Okla. Alcoholic Beverage Control Bd. v. Cent. Liquor Co., 421 P.2d 244,
247 (Okla. 1966); Carver v. Heikkila, 465 N.W.2d 183, 186 (S.D. 1991).
Caselaw in a number of states, however, has concluded the broader
concept of claim preclusion arises from declaratory actions. See, e.g.,
Smith v. Barfield, 276 S.E.2d 899, 900 (Ga. Ct. App. 1981); Downen v.
9
Country Mut. Ins. Co., 537 N.E.2d 445, 447 (Ill. App. Ct. 1989); Hofmann
v. Auto Club Ins. Ass’n, 535 N.W.2d 529, 548 (Mich. Ct. App. 1995).
We considered the question of the preclusive impact of a first
round of declaratory litigation on subsequent litigation in Fournier v.
Illinois Casualty Co., 391 N.W.2d 258, 259–61 (Iowa 1986). In Fournier,
Betty Jane Fournier, in her capacity as the administrator of the estate of
the deceased and in her individual capacity, brought an action against
the Fraternal Order of the Eagles for the death of her minor son. Id. at
258–59. She established in that action that her minor son was killed by
a driver who had become intoxicated from the consumption of alcohol
served by the Fraternal Order and obtained judgment for the estate in
the amount of $87,644.02 and in favor of the plaintiff individually as
mother of her deceased son in the amount of $100,000. Id. at 259.
The liability insurer of the Fraternal Order tendered $50,000 to the
clerk of the district court in full satisfaction of its obligation to indemnify
the Fraternal Order. Id. The Fraternal Order then filed a declaratory
action in which Fournier intervened, thus giving rise to the first round of
litigation between Fournier and the insurer. Id. The Fraternal Order of
the Eagles and Fournier argued that the insurance company owed
$50,000 for each separate and distinguishable recovery for injuries to
persons, one injury to the estate and the second injury to the mother.
Id. We ruled in the declaratory judgment action that the insurance
company was not required to make a further payment under the theory
that Fournier, as an individual parent, was “injured in person” under the
policy. Id.
In the second round of litigation, Fournier claimed the insurance
company was required to make further indemnification payments by
reason of the policy coverages related to injuries sustained as “property
10
damage.” Id. In considering whether the second claim was barred, we
cited verbatim the Restatement (Second), section 33, including language
related to issue preclusion. Id. at 260. We then proceeded to analyze the
question as if it posed a question of claim preclusion. Id. Citing the
Restatement (Second), section 24, we emphasized that “[u]nder a
pragmatic view of claim preclusion, the scope of the claim adjudicated in
the prior litigation was whether or not the defendant had any additional
responsibility under its liability insurance policy.” Id. (emphasis added).
We then, however, stated that the plaintiffs in the second litigation
sought to relitigate “the same issue, i.e., the extent of defendant’s
obligation to indemnify.” Id. (emphasis added). Finally, we declared, “We
conclude that this second effort may not be countenanced under
recognized principles of claim preclusion.” Id. at 261 (emphasis added).
It is not entirely clear whether Fournier was based on issue
preclusion or claim preclusion. Many cases have suggested where
property and personal injury claims arise out of the same transaction,
the doctrine of claim preclusion prohibits splitting causes of action. See,
e.g., Dill v. Avery, 502 A.2d 1051, 1052–54 (Md. 1986) (citing
Restatement (Second), section 24 and holding that a claim of personal
injury is precluded where there had been a previous action on damage to
property arising from the same accident); Pielhau v. State Farm Mut. Auto.
Ins. Co., 314 P.3d 698, 701–03 (N.M. Ct. App. 2013) (citing Restatement
(Second), section 24 and holding that claim preclusion prohibits an
insured from litigating underinsured motorist coverage where in prior
litigation, plaintiffs had sought to establish coverage under different
policies with the insured); Peterson v. Temple, 918 P.2d 413, 417 (Or.
1996) (stating that claim preclusion prohibited plaintiff from recovering
damages for personal injuries arising from an accident where plaintiff
11
had previously litigated property damage arising from the same accident
and against the same party); Landry v. Luscher, 976 P.2d 1274, 1276
(Wash. Ct. App. 1999) (stating the rule against claim splitting—i.e., claim
preclusion—prohibits splitting of personal injury and property claims
arising out of same transaction). There is at least a question whether
issue preclusion was applicable in Fournier as arguably the “issue” of
coverage for property damage was not actually litigated in the prior
proceeding. See Hunter v. City of Des Moines, 300 N.W.2d 121, 123 (Iowa
1981) (distinguishing “issue preclusion”—where the issue had to be
actually raised and litigated in prior proceeding—from what we now call
claim preclusion—where the issue “could” have been tried in prior
proceeding); Cruise v. Wendling Quarries, Inc., 498 N.W.2d 916, 920
(Iowa Ct. App. 1993) (holding common issue of fault was actually
litigated in prior property damage suit and determined adversely to
plaintiff, and therefore fault could not be relitigated in subsequent
personal injury action under issue preclusion); Am. Ins. Co. v. Messinger,
371 N.E.2d 798, 800 (N.Y. 1977) (holding arbitration decision disallowing
insurer’s coverage defense binding in subsequent personal injury action
where the issue was actually litigated and decided in prior action). If,
however, the “issue” in the prior proceeding is more broadly
characterized as the extent of insurance coverage under a single
contract, issue preclusion would apply under the caselaw. 1 Cf. Macris &
1The relationship between claims preclusion and issue preclusion in successive
lawsuits involving an insurance policy was discussed at length in Aerojet–General Corp.
v. American Excess Insurance Co., 117 Cal. Rptr. 2d 427, 436–42 (Ct. App. 2002). In
that case, in the first round of litigation, the plaintiff, Aerojet, sought a declaration that
it was entitled to insurance coverage to indemnify it for costs incurred as a result of its
discharge of certain polluting chemicals. Id. at 430. The plaintiff did not succeed. Id.
at 431. In the second round of litigation, the plaintiff sought a declaration regarding its
right to indemnification under the same insurance policies for losses arising out of a
new and separate lawsuit against it based on its discharge of other pollutants. Id. at
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Assocs., Inc. v. Neways, Inc., 16 P.3d 1214, 1222, 1224 (Utah 2000)
(claims for additional contract damages beyond time frame of damages
sought in original action held barred under doctrine of issue preclusion).
While the theoretical foundations of Fournier are not clear, we find
nothing in Fournier that would prevent our consideration of the
constitutional issue here. This case does not involve multiple claims for
damages arising out of the same set of facts. Instead, it involves two
different classes of claims arising under the contracts. One class of
claims—those focused on the failure of the parties to reach a negotiated
rent under the contracts—was ripe for a declaratory judgment in the first
round of litigation. In contrast, any potential claim related to the
constitutional issue was not of immediate concern and depended upon
the contingency of the tenant electing to continue the leases for a period
beyond twenty years.
Under these circumstances, we think the general rule under the
Restatement (Second), section 33 that only issue preclusion, but not
claim preclusion, applies to declaratory actions should be followed. We
find merit to the observation that the difference between an action
declaring rights and a coercive action is the difference between
“diplomacy and war.” Sunderland at 76. The purpose of declaratory
actions—providing prompt and less abrasive relief to the parties—is
encouraged by this limited application of res judicata concepts. We
_______________
431–32. The California appellate court discussed at length the difference between claim
preclusion and issue preclusion, but it ultimately decided the issue on the ground that
the order of the court in the first round of litigation broadly declared that the insurers
“have no duty or obligation to indemnify Aerojet for any liability that Aerojet has
incurred or may incur arising out of the alleged release of waste materials at or from
property occupied at one time or another by Aerojet in Eastern Sacramento County
. . . .” Id. at 437. The California appellate court specifically disclaimed reliance on
“issue preclusion.” Id. at 440.
 13
therefore conclude that the trustee is not barred from bringing his claim
under article I, section 24 by the previous declaratory action involving a
different contractual issue related to good-faith negotiations regarding
rental rates. Hunter, 300 N.W.2d at 123.
IV. Application of Article I, Section 24 to the Lease in This
Case.
A. Introduction. In this case, the leases in question provided for
an initial five-year term with five additional five-year terms, which arise
automatically unless the lessee serves a notice of termination. The lessor
seeks a determination that the leases violate article I, section 24 of the
Iowa Constitution to the extent that the leases may continue for a period
beyond twenty years.
B. Background to Article I, Section 24. Article I, section 24 of
the Iowa Constitution provides, “No lease or grant of agricultural lands,
reserving any rent, or service of any kind, shall be valid for a longer
period than twenty years.”
The historical materials related to this constitutional provision are
sparse. A similar provision was not contained in the Iowa Constitution of
1846. Rufus L.B. Clarke proposed the provision at the Iowa
Constitutional Convention of 1857 based on a provision in the New York
Constitution of 1846. See 1 The Debates of the Constitutional Convention
of the State of Iowa 213 (1857) (reporting remarks of Mr. Clarke of Henry
County: “I have copied [the provision], in substance, from the
constitution of the State of New York.”). Clarke noted the purpose of the
New York provision was to address “the occurrence of anti-rent
difficulties in that state.” Id. New York had a history of long-term leases
on manorial land that caused considerable and sometimes violent unrest
between lessors and lessees. See Note, Iowa Constitution—Twenty-Year
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Limitation on Agricultural Leases, 39 Iowa L. Rev. 486, 487 (1954). There
is no further discussion of the provision in the debates over the 1857
Iowa Constitution.
Although they appear to have similar purposes, the language of the
New York constitutional provision is different than that of the one
adopted in Iowa. The New York provision stated:
No lease or grant of agricultural land, for a longer period
than twelve years, hereafter made, in which shall be reserved
any rent or service of any kind, shall be valid.
N.Y. Const. art. I, § 14 (1846).
Interestingly, New York has discarded the provision in its current
constitution. See N.Y. Const. art. I, § 10 (repealed 1962) (repealing the
provision on agricultural leases, which had been renumbered as article I,
section 10 in 1938). Constitutional provisions similar to the New York
precursor and to Iowa’s version of it may be found in Minnesota and
Wisconsin. See Minn. Const. art. I, § 15 (“Leases and grants of
agricultural lands for a longer period than 21 years reserving rent or
service of any kind shall be void.”); Wis. Const. art. I, § 14 (“Leases and
grants of agricultural land for a longer term than fifteen years in which
rent or service of any kind shall be reserved . . . are declared to be void.”).
A number of states, including California, have a similar statutory
restriction. See Cal. Civ. Code § 717 (2015).
C. Caselaw from Other States. The caselaw from other
jurisdictions is sparse as well. There is a trilogy of cases out of
New York. In Hart v. Hart, a tenant, the son of the lessor, claimed that a
lease of farm land for twelve years with a covenant to renew for twelve
more years if the lessor should live violated New York’s constitutional
limitation on agricultural leases. 22 Barb. 606, 606 (N.Y. Gen. Term
15
1856). The New York court upheld the initial twelve-year lease, but
found the renewal provision for additional twelve-year terms during the
life of the lessor invalid under the New York constitutional provision. Id.
at 609.
In Clark v. Barnes, a lessor challenged the validity of two leases
signed simultaneously for twelve years from the date of execution and for
the eight years after the execution of the first lease, asserting the leases
were void as an attempt to evade the constitutional limitation. 76 N.Y.
301, 303–04 (1879). The New York court found a constitutional
violation, noting that the two leases were executed “at the same time,
upon the same consideration, as parts of the same transaction, and
upon precisely the same terms.” Id. at 304.
Finally, in Parthey v. Beyer, the lessor brought an action seeking to
declare an agricultural lease invalid because of the length of its term.
238 N.Y.S. 412, 413 (App. Div. 1930). The lessor had executed a five-
year agricultural lease with a tenant, but prior to its expiration, he
signed a second lease for an additional ten-year period. Id. The
New York court held that because the new lease was executed prior to
the expiration of the prior instrument, it was an extension and was void
under the constitutional provision. Id. at 415.
California courts have considered questions regarding the validity
of leases contrary to a statute limiting the length of lease terms. In
Kendall v. Southward, a lessor brought a declaratory action seeking a
declaration that a lease “at a specified rental for the term of the natural
life of the [lessor]” was void. 308 P.2d 915, 916 (Cal. Ct. App. 1957). The
court, however, held that the lease was not void from its inception but
was valid until the expiration of the statutory period and void thereafter.
Id. at 917.
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In another California case, Klepper v. Hoover, the California
appellate court considered a declaratory action brought by a tenant
regarding the validity of a ten-year lease with an option to renew for
another ten years. 98 Cal. Rptr. 482, 483 (Ct. App. 1971). The court
treated the lease as a ten-year lease with an option to renew. Id. at 485.
While California law limited agricultural leases to twenty years at the
time the lease was executed, the law was amended to allow leases up to
fifty-one years before the option was exercised. Id. at 483. The court
concluded the validity of the additional ten-year term should be
evaluated under the law at the time the option was exercised, not the law
at the time of execution of the underlying lease. Id. at 485.
D. Iowa Caselaw. The first Iowa case in which article I, section 24
was implicated is Benschoter v. Hakes, 232 Iowa 1354, 1355, 8 N.W.2d
481, 483 (1943). In Benschoter, the lessor brought a quiet-title action
regarding farmland in which the defendant claimed an interest pursuant
to the lease. Id. The lease term ran from September 26, 1940, until
February 26, 1942. Id. Although the lease term had expired, the
defendant claimed a right to continued tenancy until March 1, 1943,
because the lessor failed to give notice of termination of the lease on or
before November 1, 1941, as provided by an Iowa statute. Id. We noted
that the law cannot operate to extend the lease beyond a term of twenty
years within the prohibition of article I, section 24. Id. at 1364, 8 N.W.2d
at 487.
In 1979, we decided Casey v. Lupkes, 286 N.W.2d 204, 207 (Iowa
1979). In Casey, trustees under the will of the lessor challenged the
validity of an agricultural lease that, in addition to termination for
default, provided for termination in forty-five years or on February 28
17
following either the death or disability for one year of the lessees,
whichever occurred first. Id. at 205.
We contrasted article I, section 24 of the Iowa Constitution with
article I, section 14 of the New York Constitution of 1846. Id. at 205–06.
The New York provision stated that no agricultural lease for a period of
longer than twelve years “shall be valid.” In contrast, the Iowa restriction
provides that no agricultural lease “shall be valid for a longer period than
twenty years.” Id. at 206. As a result, we concluded in Casey that the
lease was valid for a period of twenty years from its effective date and
invalid only as to the excess. Id. at 207.
E. Analysis. The above caselaw provides some guidance for our
determination of the question posed in this case: namely, whether a lease
for five years with five additional five-year renewal periods at the option
of the tenant violates article I, section 24. Under Casey, a lease that
potentially lasts longer than twenty years is not invalid from its
inception, but only becomes invalid after the expiration of a twenty-year
period. Id. Thus, the question in this case is not whether the leases
were invalid at their inception, but only whether they will become invalid
after the expiration of twenty years.
The leases in this case provide for automatic renewals every five
years but allow the tenant to opt out of the lease by providing required
notices. Thus, while the landlord may be locked into the leases for a
twenty-five-year period, the tenant is not. To the extent article I, section
24 is designed to protect tenants, an argument can be made that the
underlying policy of article I, section 24 is not offended by the leases in
this case.
It seems clear that historically, article I, section 24 was intended in
large part to protect agricultural tenants who suffered due to oppressive
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long-term relationships with established landlords. Yet, the language of
article I, section 24 does not run solely in favor of the tenant. The
language instead is couched in more general terms and does not
distinguish between the interests of landlords and tenants. While the
language obviously is sufficiently broad to protect tenants from being
locked into oppressive leases, it also appears to advance the larger
purpose of promoting the alienation of agricultural lands by not
excluding landlords from its terms. It is well established that a broadly
framed constitutional provision should not be narrowly interpreted in a
fashion that limits its application to the specific mischief at hand.
Weems v. United States, 217 U.S. 349, 373, 30 S. Ct. 544, 551, 54 L. Ed.
793, 801 (1910). Because one of the parties may be locked into these
agricultural leases for more than twenty years, we conclude that article I,
section 24 will be offended if that contingency occurs.
Our holding that article I, section 24 may be enforced by lessors as
well as lessees is consistent with the prevailing caselaw. In Casey, the
trustees of the lessor’s will brought the action. Casey, 286 N.W.2d at
205. Similarly, in cases from other jurisdictions, limitations on the term
of agricultural leases have been enforced at the behest of lessors. Clark,
76 N.Y. at 301; Parthey, 238 N.Y.S. at 413.
We also conclude the fact that the leases provide the tenant with
an option to renew does not save the leases from constitutional infirmity
after the passage of twenty years. Here, as to the lessor, the lease
created a potentially binding twenty-five year obligation. Under Casey,
we conclude that such a lease is valid for twenty years but is
constitutionally infirm after the twenty-year period has expired.
We do not regard dicta in Benschoter as authority for a contrary
proposition. In Benschoter, either party to the lease could terminate it.
19
232 Iowa at 1364, 8 N.W.2d at 487. Here, only one party, the tenant,
could terminate the lease prior to the expiration of the full twenty-five-
year period.
We wish to make it clear that nothing in this opinion limits the
possibility of the parties themselves mutually agreeing to renew a lease
for an additional period of time. Article I, section 24 does not prohibit all
landlord–tenant relationships that exceed twenty years. It only prohibits
a lease for agricultural purposes that continues in effect for more than a
twenty-year term.
V. Conclusion.
For the above reasons, the judgment of the district court is
affirmed.
AFFIRMED.