This case concerns efforts by the plaintiff, Iowa State Bank & Trust Co., to reach homestead property owned by the defendants, Phillip and Marci Michel, to satisfy a personal judgment entered against the defendants on a defaulted loan. Although the Michels waived the statutory homestead exemption applicable to them property when they mortgaged the property as security for the loan, they did not sign the agricultural homestead disclosure required by Iowa Code section 561.22 (1997) for homestead exemption waivers on agricultural property. The trial court held the mortgage was enforceable despite the absence of a signed disclosure, after determining that the Michels’ forty-seven-acre parcel was not agricultural land subject to section 561.22. In addition to upholding the written mortgage, the trial court found the bank was entitled to an equitable mortgage under various equitable theories. Finally, the court held that evеn if the bank was not entitled to foreclose on the defendants’ homestead, their homestead, by statute, was limited to forty acres.
On the defendants’ appeal, the court of appeals concluded the homestead was agricultural property within the meaning of section 561.22, rendering the bank’s mortgage unenforceable. The court of appeals affirmed the district court, however, concluding the bank was entitled to an equitable mortgage.
The Michels were granted further review. Upon our consideration of the arguments of the parties, we think the court of appeals was only partially correct. We agree the defendants’ property is agricultural land and therefore the bank’s mortgage is unenforceable as to the homestead because the bank did not have the debtors sign the required agricultural homestead disclosure. On the other hand, we do not think the bank is entitled to an equitable mortgage. Accordingly, wе vacate the court of appeals decision.
The Michels did not contest the trial court’s alternative ruling that their homestead rights are limited to forty acres, thereby rendering seven acres of their property subject to foreclosure under the mortgage. Consequently, we affirm the trial court’s judgment of foreclosure with respect to seven acres of the defendants’ property and reverse the district court’s judgment foreclosing the bank’s mortgage on the Michels’ forty-acre homestead.
I. Scope of Review.
Review of an equitable claim to foreclose a mortgage is de novo.
Beal Bank v. Siems,
II. Background Facts and Proceedings.
The Michels own forty-seven acres of land in rural Johnson County, Iowa. The area is zoned residential, although land in the vicinity of their property includes farms as well as residential areas. The defendants’ home is located on this land and there is no dispute forty acres of the
In 1998 the defendants borrowed $225,000 from the bank to finance their investment in a convenience store. As security for the loan, they gave the bank a second mortgage on their property. Included in the mortgage agreement was a specific waiver of “all homestead or other exemptions to which [the Michels] would otherwise be entitled under any applicable law.” In addition, the mortgage included the language required by Iowa Code section 561.22, but the bank, operаting under the belief that the defendants’ property was not “agricultural land,” did not check the box by this section of the mortgage to indicate its applicability nor did the bank have the Michels sign and date this provision as required by the statute.
The convenience store, was unsuccessful, causing the Michels to default on their loan. The bank then filed a petition to foreclose on the mortgage and requested a personal judgment against the defendants as well. The bank also raised various equitable theories for relief. The Michels asserted the bank’s noncompliance with section 561.22 barred foreclosure.
After trial, the district court ruled the Michels’ property was not agricultural land and therefore the bank did not have to obtain the signed disclosure required when the owner of agricultural land waives the homestead exemption. The court relied on several factual findings: (1) 32 of the 47 acres owned by the Michels had never been used for agriсultural purposes; (2) no net income had ever been generated from the production activities conducted on the other fifteen acres, which had been used at various times to grow hay, soybeans, oats, and corn; (3) the defendants had never worked the land themselves, but had entered into crop-share leases with tenants; and (4) the property was zoned residential because, according to the county assessor, there was no bona fide farming operation on the land. Even though the court concluded section 561.22 did not apply and the mortgage was valid, it also held that each of the equitable theories asserted by the bank as a basis for equitable relief — equitable mortgage, specific performance, waiver/estoppel, reformation, constructive trust, and subrogation — were proven.
Based upon its findings of fact and conclusions of law, the district court entered judgment against the defendants in the sum of $292,704.48 plus interest. The court held the judgment was secured by the mortgage given on the Michels’ homestead and that the mortgage was enforceable against the defendants’ interest in that property. To carry out the equitable remedies found to be applicable, the court ordered the defendants to sign a mortgage and homestead waiver in favor of the bank. The court also deemed the bank to be a beneficiary of a constructive trust and holder of an equitable mortgage that the bank could enforce by sheriffs sale. Finally, the court held that even if the bank
The defendants appealed, alleging error in the court’s enforcement of the mortgage and the award of attorney fees. The Mi-chels did not contest the personal judgment entered against them for the balance due on their loan. After filing the appeal, the defendants posted a supersedeas bond in order to stay proceedings under the judgment. As security for the bond, the Michels pledged their forty-seven-acre property.
The case was transferred to the court of appeals. Initially, the court rejected the bank’s claim that the appeal was moot since the defendants had signed a waiver incorporating the agricultural homestead disclosure required by section 561.22 when they posted their land as security for the bond. The court then determined the Mi-chels’ property was agricultural land because it was “suitable for use in farming,” as that phrase is used in the statutory definition of “agricultural land” found in Iowa Code section 9H.1(2). Based on this conclusion, the court of appeals held the bank’s mortgage was unenforceable because the bank had not obtained the signed disclosure required by section 561.22. Nonetheless, because the evidence clearly established that the Michels knew they were mortgaging their homestead and intended to do so, the court held the bank had an equitable mortgage on the property that it could foreclose. As a final matter, the court rejected the defendants’ challenge to the attorney fee award. The court ruled that the post-trial decision on attorney fees addressed a collateral matter and the defendants were required to file a separate notice of appeal to contest this award, which they had not done.
We granted the Michels’ application for further review. They claim the court of appeals erred in ruling the bank was entitled to an equitable mortgage and in requiring a separate appeal of the attorney fee award. Although the bank resisted the defendants’ application, it asserted that in the event further review was granted, this court should correct the court of appeals’ decision in two particulars: (1) rule that the Michels’ property was not agricultural land subject to the protection of section 561.22; and (2) hold that the posting of the homestead as security for the supersedeas bond waived the defendants’ claim that the property was exempt. Should it become necessary, the bank also asks that we consider the other equitable theories the district court found applicable.
III. Effect of Using Homestead Property as Security for Supersedeas Bond.
The bank contends this appeal is moot because it can collect the unchallenged personal judgment under the terms of the bond, reaching the homestead property in this manner. This argument is based on the bank’s supposition that the defendants’ failure to appeal the personal judgment operated as an affirmance of that judgment, thereby making the bond аvailable to satisfy it. We agree with the court of appeals that this argument has no merit.
The weakness in the bank’s argument is revealed by an examination of two provisions of the Iowa Rules of Appellate Procedure. Rule 6.7(1) requires as a “condition of [a supersedeas] bond ... that appellant will satisfy and perform the judgment if affirmed.” Iowa R.App. P. 6.7(1) (emphasis added). Rule 6.9 provides in pertinent part:
If an appellate court affirms the judgment appealed from, it may, on motionof appellee, render judgment against appellant and the sureties on the appeal bond for the amount of the judgment, with damages and costs.
Iowa R.App. P. 6.9 (emphasis added). It is apparent from the express language of these rules that a supersedeas bond guarantees payment of and is available to satisfy only a judgment that is “appealed from” and “affirmed.”
See generally Edge v. Harsha,
The bank claims the Michels’ “failure to assign error on the personal liability [issue] requires that the trial court’s ruling on [this issue] be affirmed,” citing our decision in
Rector v. Alcorn,
Given this rule, it cannot fairly be said that an appellate court affirms a ruling that has not even been assigned as error or considered by the court on appeal. Such a ruling is neither “appealed from” nor “affirmed” within the contemplation of our rules of appellate procedure. For this reason, the personal judgment entered against the Michels by the trial court was not secured by the supersedeas bond they filed. That bond only secured the judgment “appealed from,” which was the Mi-chels’ challenge to the judgment foreclosing the bank’s mortgage. Therefore, the bank cannot reach the Michels’ homestead by recovering on the bond unless and only to the extent the district court’s decision granting foreclosure is affirmed. Accordingly, this appeal is not moot.
IV. Correctness of Trial Court’s Determination the Michels’ Homestead Was Not Agricultural Land.
“Homestead rights are jealously guarded by the law.”
Merchants Mut. Bonding v. Underberg,
In addition to these provisions the legislature has adopted additional protections for agricultural land. In response to a national economic recession in agriculture, the general assembly enacted a legislative package in 1986 known as the “Farm Crisis Prоgram.”
West Des Moines State Bank v. Mills,
If a homestead exemption waiver is contained in a written contract affecting agricultural land as defined in section 9H.1, or dwellings, buildings, or other appurtenances located on the land, the contract must contain a statement in substantially the following form, in boldface type of a minimum size of ten points, and be signed and dated by the person waiving the exemption at the time of the execution of the contract: “I understand that homestead propertyis in many cases protected from the claims of creditors and exempt from judicial sale; and that by signing this contract, I voluntarily give up my right to this protection for this property with respect to claims based upon this contract.”
Iowa Code § 561.22 (italics added).
2
The legislature hoped this additional “procedural step” in the waiver of homestead rights on agricultural land would “encourage second thoughts about executing the waiver” by “reminding] the person signing the waiver that it was important.”
Mills,
In deciding whether the protection afforded by section 561.22 applies to the situation at hand, we think the determinative issue is whether the mortgage the bank seeks to foreclose affects “agricultural land as defined in section 9H.1.” Iowa Code § 561.22. The term “agricultural land” is defined in section 9H.1 as- “land suitable for use in farming.” Iowa Code § 9H.1(2). Chapter 9H also defines the word “farming” as
the cultivation of land for the production of agricultural crops, the raising of poultry, the production of eggs, the production of milk, the production of fruit or other horticultural crops, grazing or the production of livestock. Farming shall not include the production of timber, forest products, nursery products, or sod and farming shall not include a contract where a processor оr distributor of farm products or supplies provides spraying, harvesting or other farm services.
Iowa Code § 9H.1(19). Thus, pertinent to this case, farming encompasses crop production and grazing. A “crop” includes plants “that can be grown and harvested extensively for profit or subsistence,” in other words for income or as a source of food. Webster’s Third New International Dictionary 540 (unabr. ed.2002) (defining “crop”); id. at 2279 (defining “subsistence”).
The error made by the bank and the district court is their misplaced focus on the definition of farming to the exclusion of the limiting language — “suitable for use in” — -found in the definition of “agricultural land.” The bank contended and the district court found that the Michels were not actively nor personally engaged in farming on their property and from this fact drew the conclusion that their land was not, therefore, “agricultural land.” But “agricultural land” is not defined as land actively used for farming by the owner or someone else; it is defined as land
suitable
for farming.
See In re Wagner,
Focusing then on the suitability of the Michels’ land for farming, we conclude based upon our de novo review of the record that the Michels’ property qualifies as “agricultural land” because the evidence clearly establishes that their property was, in general, fit for use in crop production and grazing. Eight acres of the forty-seven-acre parcel is pasture land that is currently used for horses, but is also suitable for grazing livestock. Fifteen acres is tillable and has been used to grow various crops over the years. The most prevalent
Our interpretation of the governing statutory provisions necеssarily requires that we reject the district court’s rationale for concluding the Michels’ property is not agricultural land. Contrary to the district court’s reasoning, whether the land is currently being farmed, whether the property owners are themselves capable of farming the land, and whether the parcel is large enough to be an independently profitable farm, while relevant factors, are not determinative. Moreover, the fact that the property is in a residential zoning district does not preclude a finding that it is agricultural land where, as here, the zoning classification does not prohibit farming operations on the property. In conclusion, if the land is fit for grazing or is capable of being cultivated to produce agricultural crops, it qualifies as agricultural land. The district court erred in adding requirements to the statute that went beyond the express terms chosen by the legislature.
See State v. Johnson,
We also reject the district court’s determination that the final explanatory sentence of the definition of farming operates to exclude the defendants’ property from the definition of agricultural land. Section 9H.1(19) states that “farming shall not include a contract where a processor or distributor of farm products or supplies provides spraying, harvesting or other farm services.” The district court concluded that because the Michels routinely hired spraying and fertilizing services and also engaged in crop sharing arrangements for crop production, even the fifteen tilled acres did not fall within the definition of farming. We think the district court’s
Finally, we reject the bank’s argument, adopted by the district court, that section 561.22 does not apply because the defendants are not the type of persons the legislature intended to assist when it enacted this statute. The district court reasoned, “The legislature was not concerned with protecting ... people who, like the Michels, live in a rural area as a matter of lifestyle choice and not because they are a farmer.” Based on the legislative history of section 561.22, the district court may be right that the Michels are not the prototypical type of person who suffered from the agricultural economic recession that prompted the general assembly to enact this statute. Nonetheless, we must determine legislative intent from the words used by the legislature and, as we have already discussed, the legislature gave the protection afforded by section 561.22 to all owners of land suitable for farming, not just those owners actively engaged in farming. Compare Iowa Code § 9H.1(2) (defining “agricultural land” as “land suitable for use in farming”), and Iowa Code § 9H.1(19) (defining “farming”), with Iowa Codе § 9H.1(1) (defining the term “actively engaged in farming”). We think the breadth of this statute makes sense when one considers that the legislature may have wanted to benefit retired farmers who still own and live on their land but no longer personally farm it. As a final point, if the legislature had wanted to limit the applicability of section 561.22 to those actively farming the land, it could easily have done so. Compare Iowa Code § 561.22 (applying disclosure requirement to “land suitable for use in farming”), with Iowa Code §§ 159A.4(1)(?) (requiring person on Renewable Fuels and Coproducts Advisory Committee to be “actively engaged in farming”), 161C.6(1)(5) (resting eligibility for organic nutrient management program on whether person is “actively engaged in farming”), 654A.1 (defining “agricultural property” for purposes of farm mediation statute as “agricultural land that is principally used for farming”). Its failure to do so precludes this court from narrowing the reach of the statute.
V. Substantial Compliance with Section 561.22.
The bank argues alternatively that it substantially complied with section 561.22 when it had the defendаnts sign a document that included the following language:
Security interest: We will take a mortgage on your home. You could lose your home if you do not meet the obligations in your agreement with us.
We need not determine whether substantial, as opposed to strict, compliance is sufficient because the circumstances upon which the bank relies fail to establish even substantial compliance with section 561.22. In deciding whether a party has substantially complied with a statutory requirement, we evaluate whether the asserted compliance assures that the reasonable objectives of the statute will be met.
See Harrison v. Employment Appeal Bd.,
First, informing a debtor that he is mortgaging his home is not the same as informing the debtor that he is waiving his homestead exemption right by doing so. Although a debtor may understand he has pledged his home as cоllateral for a loan, he may not realize that he no longer has the benefit of the homestead exemption.
See Red River State Bank v. Reierson,
Furthermore, we do not think the defendants’ subjective understanding of the transaction constitutes substantial compliance or excuses the bank’s noncompliance with the statute. This precise argument was rejected by the North Dakota Supreme Court interpreting a similar statutory provision in
Red River State Bank.
Under North Dakota law, mortgages on any homestead must include a conspicuous statement informing the debtor “that homestead property is in many cases protected from the claims of creditors and exempt from judicial sale” and, that by signing the mortgage, the debtor is giving
We agree with this reasoning. To conclude there was substantial compliance with section 561.22 in the absence of the required disclosure would be tantamount to ignoring the legislature’s policy decision that all mortgages on agricultural land must include the specified disclosure signed by the borrowers.
Cf. Iowa Dep’t of Transp. v. Iowa Dist. Ct.,
VI. Propriety of Equitable Remedy.
A.
Equitable mortgage.
Based on various equitable theories, the trial court and court of appeals decided that the bank was entitled to an equitable mortgage because the Michels admitted they intended to give the bank a mortgage on their homestead. These courts and the bank relied on our cases that have recognized an equitable mortgage where there was a deficiency or uncertainty in the written instrument that purported to create a security interest in the subject property.
See, e.g., Tubbs v. United Cent. Bank, N.A.,
This court has stated under other circumstances that “courts of equity are bound by statutes and follow the law in [the] absence of fraud or mistake.”
Mensch v. Netty,
B.
Reformation.
As noted above, the rule requiring courts to give effect to statutory requirements, whether the issue arises in law or equity, incorporates an exception for fraud or mistake.
See Mensch,
A contract may be reformed where, due to mistake, “the contract does not reflect the actual intent of the parties.”
Wellman Sav. Bank v. Adams,
454 N.W.2d
The bank claims “it was the intent of both parties that [the Michels’] homе and [forty-seven] acre parcel be collateral for the $225,000 loaned to them.” Even if this intent is equivalent to an intent by the Michels to waive their homestead exemption, we do not believe the bank is entitled to equitable relief. The law requires that the bank disclose to the Michels in a conspicuous manner the effect of their waiver of homestead rights. See Iowa Code § 561.22. The purpose behind this disclosure is to ensure the debtors truly comprehend what they are doing and consider the effect of the waiver in deciding whether to enter into the transaction. Here the disclosure was not given due to the bank’s determination that the statutory requirement was inapplicable and, as a consequence, the Michels were deprived of the beneficent effect of the statutory admonition. As a consequence, their intent to mortgage their property was formed without the benefit of the required disclosure. We think reformation to refleсt “the true agreement of the parties” would be inappropriate under these circumstances because the statutory requirement that was ignored could have potentially affected the debtors’ decision to agree to the terms of the mortgage. Therefore, we choose not to exercise our discretion to reform the mortgage instrument.
C.
Waiver/estoppel.
The bank alleges a misrepresentation by the Michels to support its theories of waiver and estoppel. It claims “the Michels represented that they were not engaged in any agricultural activities when they provided their tax returns and other documentation showing no such activities.” Assuming for purposes of our discussion only that proof of waiver or estoppel would warrant equitable relief despite the bank’s noncompliance with statutory requirements for a mortgage on homestead property, we do not think the bank has proven these theories. As for the bank’s wаiver argument, there is no connection between the Michels’ income tax returns and whether they knew of and intentionally relinquished their right to the agricultural homestead disclosure.
See generally Huisman v. Miedema,
D.
Specific performance.
The bаnk also seeks specific performance, asserting the Michels should be required to
Moreover, to require the Michels to execute a different set of papers would improperly disregard the bank’s failure to comply with statutory requirements in obtaining its mortgage on the Michels’ homestead. As we have already discussed, the agricultural homestead disclosure required by section 561.22 was intended to alert potential mortgagees to the effect of then-waiver of homestead rights before execution of the mortgage documents so they would think twice before mortgaging then-homestead. To require an after-the-fact execution of the disclosure would totally defeat the purpose of this statute.
E.
Constructive trust.
Finally, we address the bank’s misplaced reliance on
Cox v. Waudby,
VII. Attorney Fee Award.
After the Michels filed their notice of appeal from the district court’s judg
Although the filing of a notice of appeal generally deprives the district court of jurisdiction, the court “retains jurisdiction to proceed as to issues collateral to and not affecting the subject matter of the appeal.”
Landals v. George A. Rolfes Co.,
In considering the appeal of post-appeal rulings on collateral issues, we have held such rulings “are separately appealable as final judgments.”
State v. Formaro,
The same conclusion is required here. Because the matter of attorney fees is a collateral issue and was decided after the defendants had appealed the court’s ruling on the merits of the lawsuit, the defendants were required to separately appeal the award of attorney fees to bring that matter before us for review. Since the Michels failed to do so, we may not consider the district court’s attorney fee award on appeal.
VIII. Summary and Disposition.
The bank may not rely on the superse-deas bond secured by the Michels’ homestead to satisfy the personal judgment rendered against the defendants. The defendаnts did not appeal the personal judgment and therefore the bond does not guarantee payment of that judgment. Accordingly, the bank is not able to reach the homestead except to the extent the trial court’s judgment allowing foreclosure of the bank’s mortgage on this property is affirmed. Consequently, this appeal is not moot.
The defendants’ property is agricultural land because it is suitable for use in farming. Therefore, in order to obtain a valid waiver of the defendants’ homestead rights, the bank was required to comply with section 561.22. Not only did the bank fail to obtain the required signed statement, it did not substantially comply with section 561.22 by merely advising the Mi-chels that they could lose their home if they defaulted on their loan. In addition, the defendants’ subjective understanding that they were mortgaging their home did not dispense with the necessity of giving the required admonition. Because the bank failed to comply with section 561.22, the defendants’ waiver of the homestead exemption is unenforceable. The district court erred in ordering foreclosure of the bank’s mortgage insofar as the forty-acre homestead is concerned.
The bank is not entitled to an equitable mortgage under any of the theories asserted. When the only factual basis for equitable relief is the understanding of the debtors that they are mortgaging their home, recognition of an equitable mortgage would render section 561.22 a nullity. Because the statutory disclosure omitted
The defendants failed to file a separate notice of appeal from the district court’s post-judgment and post-appeal ruling on the bank’s motion for attorney fees. Therefore, that issue is not before us.
As noted earlier, the trial court ruled that only forty of the defendants’ forty-seven acres are exempt as their homestead, see Iowa Code § 561.2, a ruling not challenged by the defendants on appeal. It appears from the record that the Mi-chels have not platted or selected the precise boundaries of their homestead, as permitted by Iowa Code section 561.4. Therefore, the case must be remanded to the district court for further proceedings. See Iowa Code § 561.6 (permitting district court, upon application of any creditor or other interested person, to fix and establish the boundaries of a homestead).
In conclusion, we vacate the decision of the court of appeals, affirm the judgment of the district court to the extent it ordered foreclosure on seven acres of the defendants’ property, and reverse the district court’s judgment of foreclosure as to the defendants’ forty-acre homestead. This case is remanded for further proceedings.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART; CASE REMANDED.
Notes
. Establishment of a forest reservation under Iowa Code chapter 427C entitles the landowner to a tax exemption for each year that the property is maintained as a forest reservation. See Iowa Code § 427C.1. The landowner must not permit livestock on the designated tracts of land, nor may the owner use the land for economic gain other than the gain from raising forest or fruit trees. See Iowa Code § 427C. 10.
. When section 561.22 was first adopted, its reach was not expressly restricted to the waiver of homestead exemptions on agricultural land.
Mills,
. The bank argues that the fifteen acres upon which the Michels’ home sits does not qualify as agricultural land and therefore the defendants should not benefit from section 561.22. We think, however, the parcel must be considered in its entirety in deciding whether the Michels’ land is agricultural.
Cf. Qualley v. State Fed. Sav. & Loan,
. Although an agricultural homestead disclosure was included in the mortgage documents signed by the Michels, the bank does not argue that this fact establishes substantial compliance. The bank’s apparent recognition of the weakness of such an argument is perhaps based on the following facts: (1) the agricultural homestead disclosure appeared on a separate page after the page upon which the Michels signed; (2) a blank box at the margin near the disclosure was not checked, indicating it was not applicable (indeed, the bank did not believe section 561.22 applied to the Michels' land); and (3) it appears this section was not brought to the attention of the defendants at the time the mortgage was executed (there is no dispute the agricultural homestead disclosure was not signed and dated by the Michels as required by section 561.22). For these reasons, although the required language appears in the mortgage documentation, this case for all practical purposes is one in which the required disclosure was simply not made.
. In
Red River State Bank,
the lender obtained a conditional equitable lien on the debtors’ homestead property that was subject to the debtors' homestead exemption so long as the debtors resided on the property as a homestead.
. The bank contends a constructive trust maybe imposed in the absence of fraud. See, e.g.,
Loschen v. Clark,