FRED HANSEN, JR. and MARTHA HANSEN, Plaintiffs-Appellants, vs. DELORES CUPP, RAYMOND HANSEN, ROGER HANSEN, and RICHARD HANSEN, Defendants-Appellees.
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IN THE COURT OF APPEALS OF IOWA
No. 9-093 / 08-0588
Filed April 22, 2009
FRED HANSEN, JR. and MARTHA HANSEN,
Plaintiffs-Appellants,
vs.
DELORES CUPP, RAYMOND HANSEN,
ROGER HANSEN, and RICHARD HANSEN,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Pottawattamie County, Charles L.
Smith, III, Judge.
Plaintiffs appeal the district court ruling finding a deed transferring real
estate was absolute on its face and rejecting parol evidence to determine
whether the deed was a part of a family agreement that had been partially
performed. REVERSED AND REMANDED.
Charles R. Hannan of Hannan & Dreismeier, P.L.C., Council Bluffs, for
appellants.
Robert V. Rodenburg of Rodenburg Law Offices, Council Bluffs, for
appellees-Delores Cupp, Raymond Hansen, and Roger Hansen.
Scott H. Peters of Peters Law Firm, P.C., Council Bluffs, for appelleeRichard Hansen.
Considered by Sackett, C.J., and Potterfield and Mansfield, JJ.
2
SACKETT, C.J.
Plaintiffs Fred Hansen, Jr. and Martha Hansen seek return of farmland
conveyed by quitclaim deed to their four children, Delores Cupp, Raymond
Hansen, Roger Hansen, and Richard Hansen. They contend the district court
erred in (1) finding there was a conclusive presumption the deed was absolute on
its face, and (2) failing to consider parol evidence that the deed was a part of a
family agreement which has only been performed in part.
We reverse and
remand.
SCOPE OF REVIEW. We note first the parties disagree as to what scope
of review applies. Our review on appeal depends on the manner in which the
district court tried the case. See Johnson v. Kaster, 637 N.W.2d 174, 177 (Iowa
2001). Plaintiffs contend the matter was tried in equity and our review is de
novo. The defendants contend this is an action for construction of a deed so the
matter is at law and legal questions are reviewed for correction of errors at law.
The district court ruled on objections.
“Where there is uncertainty about the nature of a case, a litmus test we
use in making this determination is whether the trial court ruled on evidentiary
objections.” Ernst v. Johnson County, 522 N.W.2d 599, 602 (Iowa 1994). We
determine this case was tried at law. When a case is tried at law, we review for
the corrections of errors at law.
N.W.2d 686, 690 (Iowa 2005).
See Molo Oil Co. v. City of Dubuque, 692
3
BACKGROUND. The evidence at trial presented the following scenario.1
Fred and Martha, in reaching their later years, foresaw their assets being
dissipated by care and medical cost of their old age. They wanted to assure that
their two hundred acre farm would not be used to pay for this care.2
They
wanted their four children to receive the farm, their son Richard to continue to
farm it and to have an option to purchase the land when they were gone.
Unfortunately their plan has gone astray.
The events at issue began on January 19, 2005, when Martha contacted
Attorney Frank Pechacek. Fred had suffered a stroke earlier and was unable to
talk or write. Martha conveyed her wishes to Pechacek and he suggested the
couple deed the farm to their children and have the children sign a family
agreement that the income from the farm would go to Martha until she entered a
nursing home and that Richard could rent the farm and have an option to
purchase. There was some family dialogue about this proposal and Pechacek
was told by one or more family members it was satisfactory so he proceeded to
prepare a quitclaim deed and a family agreement.
prepared.
The documents were
As grantors in the deed, Fred and Martha were to convey an
undivided one-fourth interest in the land to each of the four children.3 The deed
1
In relating these facts we are considering both evidence the district court considered
and evidence the district court did not consider because it found the use of some
evidence would be in violation of the parol evidence rule.
2
Martha wanted to be sure she and Fred would qualify for Title XIX if one or both of
them should go in a nursing home as they did not want to use the farm or the income
from the farm to pay for nursing home care.
3
There also is a deed wherein Fred conveyed his interest to Martha but that deed does
not appear to have any relevance to this case.
4
showed consideration of one dollar and other valuable consideration.4
The
family agreement was between the four children, it did not include their spouses,
if any, and Fred and Martha were not to be parties thereto. The agreement
provided the four children would lease the land to Martha and she should receive
the income as long as she was capable of living independently or in assisted
living. It gave Richard, who had been farming the land, the right to rent the land
at its fair market rental value during his parents‟ lifetime and at their deaths, if he
was living, an option to purchase the land.
On February 16, 2005, Pechacek went to Martha and Fred‟s home with
the quitclaim deed and the family agreement. Pechacek testified he considered
the deed and the family agreement a package.5 The deed was signed by Martha
and signed by Fred‟s “x.”
Pechacek, acting as a notary public, notarized
Martha‟s signature and Fred‟s “x.”
Defendants Delores Cupp and Richard
Hansen were at the home and they each signed the family agreement. Roger
and Raymond Hansen were not present.
Pechacek took the deed and the family agreement back to his office. On
March 22, 2005, Pechacek had the deed recorded. Roger and Raymond had not
signed the family agreement and never did sign a family agreement. Pechacek
4
It also showed no declaration of value was required as it was a deed between parents
and children and the consideration was less than $500.
5
Pechacek testified:
Q. At any time during your work on this matter, did you feel that the deed
could stand alone on its own without [the family agreement]? A. It was a
package deal. No. And I didn‟t even commence work on those
documents until I was told by the family members that the family had all
discussed it and it was a go, that it was agreeable.
Q. And by that, you mean when you say „it,‟ they had discussed that the
two documents together were agreeable to all of them? A. Correct.
5
testified that he recorded the deed quickly for it was without consideration and it
would be ineffective with respect to Title XIX benefits for a five year period.6
On April 20, 2005, the four children met with Pechacek. This was the first
time that Pechacek had spoken with Raymond and Roger. On June 28, 2005,
Pechacek sent a letter to Delores sending her a revised family agreement for her
signature and the signatures of her siblings.
Pechacek testified that the
agreement provided the farmland must be appraised if Richard wanted to
purchase it and the purchase price would be thirty percent less than the
appraised value. He also enclosed a farm lease from the four children to Martha
and asked Delores to have everyone sign it and have their signatures notarized.
A self-addressed, stamped envelope for Delores to return the signed documents
was enclosed.
There is no evidence these documents were ever signed or
returned to Pechacek. Also enclosed with the letter was the quitclaim deed to
the four children for safekeeping.
On April 6, 2006, Pechacek wrote to the four children relating it had come
to his attention that there continued to be some controversy concerning the
farmland and since Richard‟s tenancy was not terminated he continued on the
same conditions for the 2005 crop year. The letter went on to say:
At the time the farm was deeded to the four of you, there was an
oral agreement that your parents would continue to receive all of
the income from the farm unless [ ] both parents were in [a] nursing
home or the survivor was in a nursing home. The 2005 crops
belong to your parents as to their share. They should continue to
pay the landlord expenses consisting of property taxes, insurance,
6
We do not by this statement suggest that the deed would take the property out of
consideration should the plaintiffs apply for Title XIX assistance. Nor do we suggest
such actions should be sanctioned.
6
and repairs and maintenance and expenses for their one-half share
of the crops during the 2006 crop year.
All four of you were in my office and orally agreed to this. Your
parents relied on this oral agreement and deeded the farm to the
four of you and this makes the oral agreement fully enforceable by
your parents and by each of you.
In 2006 Richard paid cash rent for the farm directly to his parents. He was
terminated the next year because one or more of the other three children found
someone who would pay more and apparently Richard would not meet that price.
PROCEEDINGS. This suit was filed in December of 2006 and came on
for trial in December of 2007. The parties agreed at the commencement of the
trial that there would be a standing objection and a standing response to parol
evidence of any agreement and that the district court would rule on the objection
in its final ruling. In March of 2008 the district court entered its ruling. It noted
plaintiffs put forth two arguments: (1) the deed was not valid because of lack of
consideration and (2) the deed was fraudulent. The court found there was a
conclusive presumption the deed was absolute on its face as the deed recited
there was valid consideration and made no mention on its face of a family
agreement and the deed was not fraudulent under Iowa Code section
249F.1(2)(a) (2005). The court further found the family relationship and love and
affection were sufficient consideration for the deed. The court found a partly
performed binding oral agreement of the defendants to provide income from the
farm to Martha and Fred during their lifetimes.7
7
The court determined the
Plaintiffs did not request this relief. It also did not conform to the family agreement
signed by Delores and Richard that provided Martha would get the income and then,
only as long as she was capable of living independently or in assisted living.
7
plaintiffs could not use parol evidence to show that part of the consideration for
the deed was Richard‟s purchase option agreement.
ISSUES ON APPEAL. Fred and Martha‟s brief randomly raised a number
of arguments that do not necessarily conform to their “Statement of Issues
Presented for Review.”
Richard has not filed an appellee‟s brief.
Delores,
Raymond and Roger have. Their brief, to their credit, makes an effort to define
the issues and respond to them and correctly notes that several of the issues
now raised were not preserved for our review.
We see Fred and Martha‟s focal argument to be that the district court
erred in finding a conclusive presumption that the deed was absolute on its face
and that the district court should have considered the oral testimony that the
deed and family agreement were one package and the conveyance was not
intended to be absolute but conditional.
In order to overcome the presumption arising from the possession of the
legal title or of the deed, the evidence must be clear, convincing, and
satisfactory. Miller v. Armstrong, 234 Iowa 1166, 1169, 15 N.W.2d 265, 266-67
(1944). Presumptions are rebutted when facts to the contrary are established,
making the ultimate question whether the record presents a fact situation where
the court can determine as a matter of law that the presumed fact does not exist.
See Dyson v. Dyson, 237 Iowa 1285, 1288, 25 N.W.2d 259, 261 (1946).
There is parol evidence which, if believed, could be found to rebut the
presumption.
evidence.
The district court considered some but not all of the parol
8
The district court considered parol evidence in finding that the four
children‟s agreement to give the farm rents to their parents was enforceable
because the agreement was supported by consideration and had been partially
performed. Both plaintiffs and defendants agree that the rent from the farm was
to go to the plaintiff parents.
The district court rejected oral testimony as to whether or not Richard had
an option to purchase the farm noting there was no signed written agreement
and evidence of an oral agreement violates Iowa Code section 622.32. While
recognizing that part performance excepts a contract from the statute of frauds
under section 622.33, the court found there was not part performance of the
lease and option to purchase.
Under our statute of frauds, evidence of certain types of contracts is
inadmissible, unless it is “in writing and signed by the party” sought to be
charged. Iowa Code § 622.32. One type of contract included within the statute
is a contract creating or transferring an interest in real estate other than leases
for a term less than one year. Id. § 622.32(3). The statute “does not void such
oral contracts,” but “makes oral proof of them incompetent.” Pollmann v. Belle
Plaine Livestock Auction, Inc., 567 N.W.2d 405, 407 (Iowa 1997). There are
exceptions to the statute of frauds.
Iowa Code section 622.33 provides an exception for contracts that involve
the sale of real estate.
It removes oral agreements from the domain of the
statute under two circumstances. Id. The first circumstance is where the vendor
of a real estate contract has received “the purchase money, or any portion
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thereof . . . or when the vendee, with the actual or implied consent of the vendor,
has taken and held possession of the premises under and by virtue of the
contract.” Iowa Code § 622.33. This language permits the statute of frauds to be
avoided where a party has rendered the type of part performance described in
the statute. See Gardner v. Gardner, 454 N.W.2d 361, 363 (Iowa 1990). The
rationale for the part performance exception lies in the principles of estoppel and
fraud. Miller v. Lawlor, 245 Iowa 1144, 1152, 66 N.W.2d 267, 272 (1954). This
exception prevents fraud that would occur if the defendant were permitted to
escape performance of his or her part of the oral agreement after permitting the
plaintiff to perform in reliance upon the agreement. See id. Part performance is
not a substitute for evidence of a written contract, but is grounded in the theory
that the defendant is estopped to assert the statute of frauds as a defense. See
id.
There is evidence that the family agreement was a part of the package
with the deed. The district court found part performance of part of the family
agreement. We do not believe we can segregate the two parts of the family
agreement to determine if there was partial performance.
The district court
should have considered evidence that the parties‟ intention was the deed and the
family agreement were one package and that the land while being transferred,
would be subject to a promise to rent and sell the land to Richard as a part of the
conveyance of the property. It appears from the district court‟s ruling that it did
not consider the Pechacek‟s testimony providing that the land was being
transferred with the understanding that defendants would have the property if
10
they leased it to Martha and allowed Richard to rent it and purchase it when his
parents died, and that the deed and family agreement were a package. Nor did
the district court consider Martha‟s testimony that they signed the deed,
agreement, and lease at the same time and it was their intent that the lease and
agreement were to be signed prior to recording the deed as they did not intend
otherwise. We reverse the district court‟s ruling and remand to the district court
for the purpose of considering oral testimony as it relates to the lease and option
of Richard.
Plaintiffs also contend that the district court addressed their claim of fraud
under chapter 249F when their pleadings indicate they were claiming fraud under
chapter 684.
We agree that plaintiffs pleaded fraud under chapter 684.
However, plaintiffs failed to file a post-trial motion. This issue was not addressed
by the district court. We only decide appeals within the framework of the issues
raised, and we leave it to the district court on remand to determine the viability of
any portion of its judgment not challenged in this appeal. See City of Johnston v.
Christenson, 718 N.W.2d 290, 303 (Iowa 2006). We reverse and remand.
REVERSED AND REMANDED.
Potterfield, J., concurs. Mansfield, J., dissents.
11
MANSFIELD, J. (dissenting)
I would affirm the district court. The four children never signed either
version of the written “family agreement.” In addition, as of March 2005, the four
children had not agreed orally on a family agreement. In the absence of such an
agreement, attorney Frank Pechacek nonetheless went ahead and recorded the
deed transferring the property to the four children. He did so because he wanted
to get the clock running for Title XIX Medicaid purposes. There is no dispute that
his action was authorized by the parents, who were his clients. Subsequently, in
April 2005, the children did agree orally to pay the income from the farm to the
parents during their lifetime, but as a group they never agreed—either orally or in
writing—on an option that would allow Richard to buy the farm.8
These are the findings of the district court, and they are all supported by
substantial evidence. I also believe the district court sorted through the legal
implications of these facts correctly when it (1) refused to set aside the deed
while (2) enforcing the children‟s oral agreement to pay the income from the farm
to the parents.
The only claim pled in this case is fraudulent conveyance. The parents
did not prove a fraudulent conveyance case. I do not see evidence in the trial
record that the parents were actually made insolvent by the transfer, nor do I
8
Notably, in his April 2006 letter Pechacek does not claim there was an oral agreement
regarding an option to allow Richard to buy the farm. Rather, Pechacek refers only to an
oral agreement that the parents would continue to receive the income from the farm until
both parents were in a nursing home or their survivor was in a nursing home. The
district court‟s findings are largely consistent with that letter. The only difference is that
the district court found the income agreement was for the “lifetime” of the parents. That
finding is supported by the record, including testimony of son Roger Hansen under
questioning by the parents‟ attorney.
12
believe that a transferor (as opposed to a creditor) has standing to complain
about a transfer under chapter 684.
Even if the parents had pled some other claim, such as for cancellation or
rescission of the deed, I do not think it would be valid.
There might be
circumstances where one could use parol evidence to prove that a deed that
appears to be absolute on its face was actually part of a broader oral agreement.
See, e.g., Gardner v. Gardner, 454 N.W.2d 361, 363 (Iowa 1990). But the district
court found that the parties never agreed orally that the conveyance of the
property was subject to such an agreement.
Contrary to the majority, I believe the district court did consider all the
parol evidence and made findings regarding that evidence, which are supported
by substantial evidence. The district court found there never was a “package
deal.”
Rather, Pechacek recorded the deed, by his own admission, without
having spoken to two of the children. Later, according to the court‟s findings, the
children agreed to turn over the farm income to the parents, but they did not
agree to give Richard an option to buy the farm.
Also, I do not consider the examples cited by the majority to be valid forms
of parol evidence.
Neither Pechacek‟s “understanding” nor Martha Hansen‟s
“intent” (which are inconsistent with each other) can be used to establish an oral
agreement where one does not otherwise exist.
For the foregoing reasons, I respectfully believe that it is inappropriate to
reverse and remand here, and would instead affirm.
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