John Gansen and Elaine Bries, as Trustees of the Frances A. Gansen Declaration of Trust v. James B. Gansen
2016 Iowa Sup. LEXIS 7
| Iowa | 2016Background
- In 1997 a trust leased two tracts of farmland to James Gansen on identical five‑year leases that automatically renewed for four additional five‑year terms unless the tenant gave notice to opt out. Annual rent was to be adjusted by mutual agreement each year.
- The trustee sued in 2009 seeking declarations about rent and breach; the district court set a rental rate and the court of appeals largely affirmed. No constitutional challenge to lease duration was decided then.
- In 2013 the trustee sued again, repeating rent claims and adding a new claim that the lease term could exceed 20 years in violation of article I, section 24 of the Iowa Constitution; the trustee sought a declaration that the leases would be invalid after 20 years (i.e., after Feb. 28, 2017).
- James asserted res judicata (claim preclusion) as a defense and opposed the trustee’s motion for partial summary judgment on constitutional grounds.
- The district court granted summary judgment for the trustee, holding the leases violate the 20‑year limitation to the extent they remain in effect after 20 years; James appealed.
- The Iowa Supreme Court affirmed: (1) claim preclusion did not bar the trustee’s constitutional claim arising after the first declaratory action, and (2) the leases are valid for 20 years but unconstitutional thereafter to the extent they continue beyond 20 years.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trustee's article I, §24 claim is barred by claim preclusion from the prior declaratory action | Trustee: prior suit concerned rent negotiation; §24 challenge was not ripe earlier and may be brought now | James: same parties and facts; §24 claim could have been raised before and is barred by res judicata | Not barred: declaratory actions give rise to issue preclusion but generally not claim preclusion; §24 claim was not ripe in first suit and may be litigated now |
| Whether the lease violates Iowa Const. art. I, §24 (max 20‑year term) | Trustee: automatic renewal structure permits the lease to bind lessor beyond 20 years and is therefore unconstitutional as to any term exceeding 20 years | James: tenant’s unilateral opt‑out and renewal option mean tenant is not oppressed; lease valid | Held: under Casey, lease valid for first 20 years but constitutionally infirm to the extent it continues beyond 20 years; automatic renewal causing potential >20‑year binding on lessor violates §24 |
| Effect of an option/renewal provision on §24 validity | Trustee: renewal that potentially extends beyond 20 years is invalid as to the excess | James: option to renew (tenant can opt out) prevents constitutional infirmity | Held: option/renewal does not cure infirmity; where lease may bind party beyond 20 years it is invalid as to period after 20 years |
| Whether parties may mutually agree to extend beyond 20 years | Trustee: seeks judicial invalidation of unilateral structures extending term | James: N/A | Held: Court clarified parties can mutually agree to renew beyond 20 years; §24 only prohibits leases that continue in effect beyond 20 years without valid mutual agreement or lawful mechanism |
Key Cases Cited
- Casey v. Lupkes, 286 N.W.2d 204 (Iowa 1979) (lease valid for twenty years but invalid as to any excess)
- Fournier v. Illinois Casualty Co., 391 N.W.2d 258 (Iowa 1986) (discusses preclusive effect of declaratory judgments and scope of prior adjudication)
- Benschoter v. Hakes, 232 Iowa 1354, 8 N.W.2d 481 (Iowa 1943) (constitutional limit prevents law or agreement from extending lease beyond 20 years)
- Arnevik v. Univ. of Minn. Bd. of Regents, 642 N.W.2d 315 (Iowa 2002) (res judicata principles: same parties, final judgment, and claims that could have been raised)
- Hunter v. City of Des Moines, 300 N.W.2d 121 (Iowa 1981) (distinguishes issue preclusion from claim preclusion)
- Klepper v. Hoover, 98 Cal. Rptr. 482 (Cal. Ct. App. 1971) (validity of additional term evaluated under law at time option exercised)