JAMES E. SCHEPPELE, Plaintiff-Appell ee/Cross-Appellant, vs. BONNIE SCHULZ, Defendant-Appellant/Cross-Appellee.
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IN THE COURT OF APPEALS OF IOWA
No. 6-687 / 05-1837
Filed November 30, 2006
JAMES E. SCHEPPELE,
Plaintiff-Appellee/Cross-Appellant,
vs.
BONNIE SCHULZ,
Defendant-Appellant/Cross-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Black Hawk County, Jon Fister,
Judge.
Defendant appeals and plaintiff cross-appeals from the district court’s
order and judgment entry on plaintiff’s action for partition of real estate and
accounting. AFFIRMED AS MODIFIED ON APPEAL, AFFIRMED ON CROSSAPPEAL.
David H. Correll of Correll, Sheerer, Benson, Engels, Galles & Demro,
P.L.C., Cedar Falls, for appellant.
D. Raymond Walton of Beecher Law Offices, Waterloo, for appellee.
Considered by Vogel, P.J., and Miller and Eisenhauer, JJ.
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MILLER, J.
Defendant Bonnie Schulz appeals and plaintiff James Scheppele crossappeals from the district court’s order and judgment entry on Scheppele’s action
for partition of real estate and accounting.
We agree with Schulz that any
remaining balance of the proceeds from the sale of the subject property, after
deductions for the expenses of the sale and reimbursement of the parties’
contributions, should be divided equally between the parties. We modify the
district court’s order and judgment entry accordingly. The remainder of the order
and judgment entry is affirmed.
I. Background Facts and Proceedings.
On October 1, 2001, Schulz and Scheppele, an unmarried couple,
purchased a single-family dwelling with the intent to make it their personal
residence. In order to lower the selling price of the home, Schulz agreed to forgo
the $9,300 commission she was entitled to as a licensed real estate agent. The
parties made a total down payment of $156,084: Schulz contributed $80,000
and Scheppele contributed $76,084.
Scheppele borrowed the remaining
$150,000 due to the seller. Schulz and Scheppele took title to the home as joint
tenants with rights of survivorship.
The parties undertook an extensive renovation of the property.
The
project took approximately two years to complete. Schulz agreed to supervise
the work and provide some of the needed labor. She moved into the new home
shortly after closing and began the renovation. Scheppele agreed to bear the
monetary expenses of renovation, but did not move into the new residence until
he was able to sell his former home in November 2002. Scheppele paid the
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majority of the remodeling expenses, as well as basic home expenses such as
mortgage payments, property taxes, and utilities. Schulz made some financial
and material contributions to the remodeling. In addition, while Schulz did not
pay any of the home expenses directly, she did make a $400 monthly payment to
Scheppele from November 2001 through August 2002.
The parties’ relationship eventually deteriorated.
In August 2004
Scheppele filed an action for partition of real estate and accounting. Schulz
moved from the home in October 2004.
The matter was tried to the district court in September 2005. The court’s
order and judgment entry, as supplemented by post-trial orders, directed that, if
one party did not buy out the interest of the other within thirty days, the property
should be sold at public auction. It further directed that the proceeds from the
sale of the home, after expenses, would first be used to reimburse each party’s
contributions: $303,000 to Scheppele ($293,000 for capital contributions plus
$10,000 for certain monthly expenses) and $146,800 to Schulz ($156,800 for
capital contributions minus $10,000 for certain monthly expenses). It ordered
any remaining balance be divided sixty-five percent to Scheppele and thirty-five
percent to Schulz, in proportion to their capital contributions.
The court reached the capital contribution figures as follows.
It
determined Scheppele was entitled to reimbursement for his $76,000 down
payment, the $150,000 loan, and $67,000 in renovation expenses. It determined
Schulz was entitled to reimbursement for her $80,000 down payment, the $9300
forfeited commission, $27,500 in remodeling expenses, and $40,000 in labor. It
then reduced Schulz’s contributions by $10,000, and increased Scheppele’s
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contributions by the same amount, after determining Schulz had agreed to pay
Scheppele $400 per month towards taxes, utilities, and insurance; and that she
owed Scheppele such payments from September 2002 until she left the
residence in October 2004.
Schulz appeals and Scheppele cross-appeals. Schulz asserts the court
erred in concluding the parties were entitled to be compensated for their
respective contributions to the property. She contends that, instead, the gross
sale proceeds should be divided equally. Alternatively, she contends that if she
and Scheppele are entitled to reimbursement for their respective contributions,
the court overvalued Scheppele’s contributions, undervalued her contributions,
and erroneously found that she was obligated to pay him $400 per month until
she left the home.
Finally, Schulz contends that, after any appropriate
reimbursement for the parties’ contributions, any remaining balance from the
gross sale proceeds must be divided equally.
On cross-appeal, Scheppele
asserts the district court overvalued Schulz’s contributions.
II. Scope and Standard of Review.
This action for was filed and tried in equity. See Iowa R. Civ. P. 1.1201.
Accordingly, our review is de novo. Iowa R. App. P. 6.4. Although not bound by
the district court’s fact findings we give them weight, especially when considering
the credibility of witnesses. Iowa R. App. P. 6.14(6)(g).
III. Discussion.
In determining each party was entitled to reimbursement for their
contributions to the property and a pro rata share of any remaining amount from
the sale proceeds, the district court relied on the equitable principles governing
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the termination of a joint venture. See Jensen v. Schreck, 275 N.W.2d 374, 388
(Iowa 1979). Schulz asserts the doctrine has no application in a case such as
this, which involves the personal residence of former romantic partners. 1 We find
it unnecessary to address this contention, as we would reach the same result
whether we applied joint venture principles or the general rules of partition.
In a partition action, proceeds from the sale of the property are to be
divided according to the interest each party held in the property prior to the sale.
See Iowa R. Civ. P. 1.1209. Here, the property was held in joint tenancy with
right of survivorship. 2 Thus, each party held an undivided interest in the whole
property that, upon severance of the joint tenancy, became an interest in one-half
of the property. In re Estate of Bates, 492 N.W.2d 704, 706-07 (Iowa Ct. App.
1992). 3 This does not mean, however, that each party is simply entitled to onehalf of the proceeds after deducting the costs of the sale. It has long been held
that parties may be entitled to reimbursement for things such as value-enhancing
improvements or indebtedness. See Mahon v. Mahon, 254 Iowa 1349, 1352,
121 N.W.2d 103, 106 (1963) (improvements); Creger v. Fenimore, 216 Iowa 273,
276, 249 N.W. 147, 148 (1933) (note secured by mortgage).
1
Although we have previously applied joint venture principles in a case dividing jointly
acquired property of cohabitants, we did so because the parties stipulated the division
should me made according to such principles. See Riley v. Schrage, No. 01-0681 (Iowa
Ct. App. July 19, 2002).
2
Although Scheppele contends he was unaware the property was held in joint tenancy,
the officer that took Scheppele’s loan application testified that
[t]hey both wanted to be on the title of the property as joint tenants
because they each had children and if something happened to one of
them, . . . they wanted the other one to be able to get the house.
3
Cf. Williams v. Monzingo, 235 Iowa 434, 439-40, 16 N.W.2d 619, 621-22 (1944)
(providing conveyance to tenants in common that is silent as to respective shares
creates a presumption the tenants will take equally, but that this presumption can be
rebutted by proof to the contrary, including unequal contributions to the property).
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Accordingly, we conclude the law of partition, as well as general equitable
principles, provide for reimbursement of the contributions of the parties and an
equal division of any remaining proceeds. The same result would occur under
joint venture principles.
See Jensen, 275 N.W.2d at 388 (providing joint
venture’s adjusted termination value was to be divided equally between the
parties, with each share to be augmented and/or reduced by amounts the joint
venture was owed by or owed to the party and to account for excess
contributions to capital); 46 Am. Jur. 2d. Joint Ventures § 21, at 48 (2006) (“The
law will imply an equal division of the profits of the joint venture without regard to
any inequality of contribution in the absence of evidence to the contrary.”).
We therefore turn to the parties’ claims regarding the amount of
contributions fixed by the district court.
Schulz asserts the court overvalued
Scheppele’s renovation expenses by approximately $6500; undervalued her
financial contributions to the renovation by approximately $8000; and
undervalued her labor by one-half, $40,000.
She also contends she never
agreed to pay Scheppele $400 per month for the length of her stay in the new
jointly-owned home, but rather simply agreed to help him with expenses until he
sold his prior home.
Scheppele asserts the value of Schulz’s labor is only
$20,000, one-half the amount fixed by the district court; and moreover that any
compensation for her labor should be offset against all the household expenses
he paid over the two-year period. He also asserts Schulz should not be credited
with the commission she voluntarily forfeited to lower the home’s selling price.
The majority of these contentions turn on the credibility of the parties and
the weight given to conflicting evidence.
For instance, the parties offered
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differing versions of the agreement behind Schulz’s $400 monthly payments. In
concluding that Schulz was obligated to pay Scheppele $400 per month until she
vacated the premises in October 2004, the district court specifically found
Scheppele’s version of the agreement—that the $400 monthly payment was
Schulz’s contribution to the ongoing expenses of the new home—to be the more
credible. We give weight to, and concur in, this assessment. For this same
reason we decline to credit Scheppele’s contention that Schulz’s labor was
additional compensation for the home’s ongoing expenses rather than a
contribution to the remodeling expenses. We also find it appropriate to credit
Schulz with the $9300 forfeited commission, as we see little basis to distinguish it
from the down payments made by each party. Both items were properly included
in the contribution analysis.
We accordingly turn to the renovation expenses and the value of Schulz’s
labor. Both Scheppele and Schulz were able to support some of their individual
renovation expenditures with documentary evidence, while other expenditures
were supported solely by party testimony.
Some expenditures were
challenged—primarily through the opposing party’s testimonial opinion—and
some were not.
Similarly, Schulz’s claim for labor was based on her
undocumented estimate that over the two-year period she worked at least forty
hours per week on the renovation, and her opinion that, based on professional
labor estimates of approximately thirty-five dollars per hour, the reasonable value
of her labor was twenty dollars per hour. Scheppele countered with testimonial
evidence that could support a conclusion Schulz did not work as many hours as
she claimed.
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Based on our review of the record, we can see potential merit in some of
the individual undervaluation and overvaluation contentions. However, when we
look at overall figures fixed by the district court, and place due weight on the
court’s fact findings, we conclude those figures are fair estimates of each party’s
contributions to the property.
We accordingly affirm the district court’s
determination that the parties should first divide the proceeds of the sale, after
expenses, $303,000 to Scheppele and $146,800 to Schulz. We do, however,
modify the court’s distribution of any remaining balance, to provide that it shall be
divided equally between the parties. The remainder of the district court’s order
and judgment entry is affirmed.
Costs of this appeal are to be assessed one-half to each party.
AFFIRMED AS MODIFIED ON APPEAL, AFFIRMED ON CROSSAPPEAL.
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