ia supreme court on alienation of propertyOn April 30, 2021, the Iowa Supreme Court issued an opinion on In the Matter of the Estate of Vera E. Cawiezell, Deceased, Phyllis Knoche, Terry Brooks, and Jill Brooks, Appellants vs. Tom Coronelli and Beth Coronelli, Appellees.   Vera Cawiezell died testate in April 2018.  Her Will was admitted to probate.  In the Will the decedent devised approximately 150 acres of farm ground to her friends, Tom and Beth Coronelli, subject to certain general restrictions in favor of Terry Brooks, the Tenant, who farmed the ground during the decedent’s life.  Item 3 of the Will provided as follows:

I hereby will, devise and bequeath all of my farm real estate located … in Muscatine County, Iowa, except my homestead referred to in Item 2 above, consisting of approximately 150 acres to my friends, Tom and Beth Coronelli or unto the survivor of them, subject to the restriction that they should not sell or transfer the property outside their immediate family within a period of twenty years after my death.  Terry Brooks has been leasing the farm from me under a share crop agreement and I would request that the Coronelli family continue leasing to Terry under favorable terms for his benefit.  I further give Terry Brooks the first option to purchase the farm during the twenty year period following my death and I would further request that the terms of sale be favorable for Terry Brooks.

The Will further devised all farm equipment and livestock to Brooks and forgave any money Brooks owed to the decedent.  The residue of the estate was awarded to the decedent’s friend, Phyllis Knoche.

Terry Brooks and his spouse, Jill, were nominated in the Will as executors and were appointed executors by the Court. The executors requested Court approval of the following restriction in the proposed deed to be given to the Coronellis.  The deed restriction is as follows:

This deed is executed and delivered upon the condition that in the event all or part of the herein described property is sold or transferred to anyone other than Terry Brooks or an immediate family member of Tom and Beth Coronelli on or before April 17, 2038, then the herein described property shall revert to Phyllis A. Knoche, or her heirs or assigns, as the residual beneficiary of the Vera Cawiezell estate, free and clear of any claims of the Grantee, consistent with the terms of the Last Will and Testament of Vera Cawiezell filed in Muscatine County, Iowa, ESPR011653.

The Coronellis resisted the application alleging that it was a restraint on the alienation of the property and was void.  The District Court found that the proposed restriction of the transfer of the farmland was an invalid restraint on the alienation and void.  The Supreme Court in citing previous decisions of the Court stated that the rule against restraints on alienation bars direct restraints on the alienability of present or future vested interests and that it has long been the rule of this state that a restraint on alienation whether by deed or Will is unlawful and void.

The Supreme Court rejected the executors’ argument that the Coronellis were bequeathed only a limited fee that did not include the right to sell or transfer the property outside their immediate family for twenty years and as such, the restriction is not a violation of the rule against restraint on alienation which only applies to fee simple conveyances.  The Supreme Court concluded that the testamentary provision devises and bequeaths all of the decedent’s farmland in Muscatine County, except her homestead, to the Coronellis, and that there was no indication in the provision or any other provision that the fee is anything other than a fee simple.

The Supreme Court also rejected the executor’s argument that Iowa Code Section 614.24 (1) (2018) allows for reasonable restraints on alienation of property.  The Supreme Court concluded that the statute is not applicable in the case presently before the Court.  The Court noted that the Code provision, known as the Stale Uses and Reversions Act, is intended to simplify land transfers by shortening the title search period for reversion, reverted interests, and use restrictions.  The Supreme Court found that none of the interests covered by the Act were involved in the present case.  The Supreme Court also rejected the executors’ contention that a use restriction is equivalent of a transfer restriction.  The executors also argued that the recent Iowa Supreme Court case of In re Coe College, 935 N.W.2d 581 (Iowa 2019), held that a donor of property for a charitable use may impose such conditions as he may choose, including a restraint on alienation, and that this right is an exception to the prohibition against restraint on alienation.  The Supreme Court found the present case does not fall within the charitable-use exception.  The Court stated that a charitable gift has been defined to be “a gift to general public use which extends to the poor as well as to the rich”.

Finally, the Supreme Court rejected the executors’ argument that Iowa should adopt Sections 3.4 and 3.5 of the Restatement (Third) of Property: Servitudes which rejects Iowa’s bright-line rule prohibiting restraints on alienation and instead proposes a reasonableness standard.  The Supreme Court first noted that the argument was never presented to the District Court.  The Court went on to state that even if the error had been preserved, the Supreme Court was disinclined to adopt the Restatement (Third) position on restraints and alienation.  The Supreme Court held that the testamentary provision restricting the beneficiaries from selling or transferring the devised property outside the immediate family for a period of twenty years following the testator’s death is a prohibited restraint on alienation and is void.