This appeal steins from decisions rendered in two actions consolidated for trial. In the first action, plaintiff Wayne Ralfs sought to set aside farm leases held by defendants Reynold and Gary Mowry on property owned by LoAn King. Ralfs’ second cause of action sought an accounting of the sum required to satisfy Mowrys’ mortgage on the King property. The record reveals that subsequent to the execution of the leases between Mowrys and King, Ralfs secured title to the property through assignment of a sheriffs deed procured by another of King’s creditors, Eddy Matsui. 1
The district court found Ralfs failed to prove his claim that the Mowry/King transactions amounted to fraudulent conveyances. The court also determined that Ralfs must pay an additional $29,006.55, plus accrued interest, to satisfy Mowrys’ outstanding mortgage on the property. Ralfs appealed.
We transferred the case to the court of appeals. That court affirmed in part and reversed in part, concluding the transactions between Mоwrys and King should be set aside as fraudulent, and adjusting downwards the amount needed to satisfy Mowrys’ mortgage. We granted further review and now vacate the judgment of the court of appeals and affirm the judgment of the district court with some modification of the accounting.
I. Scope of Review.
At the outset the parties disagree over the appropriate standard of review on appeal. The court of appeals applied a de novo standard. Mowrys argue for an at-law standard on further review, сlaiming the ease turns on possession of real property and damages.
See Christian Church at Pella v. Scholte,
Our review is governed by how the case was tried in district court.
Howard v. Schildberg Constr. Co.,
The case was tried to the court without a jury. Mowrys emphasize that the district court ruled on objections (four), a practice we have disapproved in equity cases.
See Hoiv-ard,
II. Facts.
Since the early 1980s, Reynold and Gary Mowry d/b/a Mowry Brothers, havе leased 120 acres of farm ground near Bennett, Iowa, from LoAn King. In 1990, King — then a widow — desired to pay off a prior mortgage on the property. The Mowrys agreed to loan her $125,000 at twelve percent interest, secured by a first mortgage on the farm. The parties also negotiated a two-year lease for 116 acres of tillable ground at $15,000 per year, a sum corresponding to annual interest due on the loan.
Meanwhile, LoAn King became embroiled in a controversy with Eddy Matsui, a man with whom she livеd for a time following the death of her husband. In September 1991, Matsui secured a default judgment against her in federal district court in California. King, who believed the suit was meritless, attempted unsuccessfully to set aside the default. The judgment, for $133,935.23 plus interest and attornеy fees, was not properly registered in Iowa until February 1994. Significantly, the court rendering the judgment specifically rejected Matsui’s request for special execution on the land which is the subject of this appeal.
*372 In the meantime, Mowrys and King negotiаted extensions of their lease agreement for the period March 1, 1993, to February 28, 1994, with two, one-year lease options. Before the options could be exercised, they renegotiated their agreement to extend the 1993-94 lease under the same terms through February 1996, with three one-year extension options. At the same time, Mowrys and King executed an extension of their original mortgage, reducing the interest rate to 9.5%, and securing an advance for $8962.13 in unpaid taxes. The indebtedness was also enlarged to include a $15,000 payment that was applied, not to interest on Mowrys’ mortgage, but to expenses related to the King/Matsui litigation. Neither the mortgage extension nor the new lease were recorded.
Wayne Ralfs, meanwhile, kеpt abreast of these events because he was an adjoining landowner who was interested in buying King’s farm. The record reveals that he lent money to another corporation, Circle J, to help finance King’s effort to set aside the Matsui judgment in California. When that proved unsuccessful, he switched sides, contracting with Matsui to purchase whatever rights Matsui gained by execution on the judgment. When the King farm was eventually purchased at sheriffs sale by Matsui in February 1995, Ralfs had to sue Matsui to enforce their аgreement. They settled their differences in March 1996, when Matsui gave Ralfs a quit claim deed and assignment of his sheriffs certificate of sale. In April 1996, Ralfs received a sheriffs deed to the King farm, and has been the legal titleholder ever since.
That brings us to the сurrent controversy. In July 1996, Ralfs tendered a check to Mow-rys in the sum of $132,000 to satisfy their first mortgage on the property. An accompanying letter acknowledged that the precise payoff amount was undetermined. Mowrys’ unwillingness to file a release оf the mortgage lien led Ralfs to bring an action for an accounting of the balance due. Ralfs also claimed superior possessory rights to the farm, alleging the lease extensions were fraudulent conveyances designed to keep thе property out of Matsui’s — and, hence, Ralfs’ — hands. The suits were consolidated for trial.
The district court found no merit in Ralfs’ fraudulent conveyance theory, and found Mowrys’ accounting of the balance due on the mortgage more credible than Rаlfs’. This appeal by Ralfs followed.
III. Issues on Appeal.
A. Fraudulent conveyance. Ralfs argues the lease extension negotiated by Mowrys and King in January 1994 should have been set aside by the district court on the ground of fraud. The transaction undis-putedly came on the heels of Matsui’s second unsuccessful attempt to execute on the property. 2 Ralfs claims Mowrys and King used this hiatus in the legal proceedings to wrongfully withhold possession .of the King farm from Matsui and him. Mowrys contend, and the district court found, that Mowrys were merely accommodating King’s wish to maintain a stable mortgage relationship while she fought Matsui and attempted to refinance the mortgage elsewhere, and it was in Mowrys’ interest to extend the lease while the property was free and clear of Matsui’s judgment.
Our assessment of Ralfs’ allegation of fraudulent conveyance is guided by well-established legal principles. A fraudulent conveyance is a transaction by which the owner of real or personal property places the land or goods beyond the reach of the owners creditors, to the prejudice of the creditor’s legal or equitable rights.
Benson v. Richardson,
advances the principle that a debtor’s property constitutes a fund from which debts should be paid and that the debtor may not hinder a creditor’s right to procеed against the fund. A debtor who disposes of property with the intent to delay or defraud creditors exceeds legitimate authority and the transaction will be deemed *373 to be inequitable and subject to being set aside_ [T]he doctrine [applies] tо leases as well as absolute conveyances of title.
Gmham,
A court considering a claim оf fraudulent conveyance looks for “badges or indicia of fraud” such as inadequacy of consideration, the transferor’s insolvency, pen-dency or threat of third-party creditor litigation, secrecy or concealment, departurе from usual business methods, reservation of benefits to the transferor, and the debtor’s retention of the property.
Id.; Graham,
It must also be remembered that ordinarily a debtor may prefer one creditor over another, “even if the debtor’s intentions ... are spiteful and the action will delay or prevent the nonpreferred creditor from obtaining payment.”
Benson,
We conclude, as did the district cоurt, that the record before us falls far short of proving fraud by the requisite clear and convincing standard. The lease extensions about which Ralfs complains did no more than continue a business relationship between Mowrys and King that extended back mоre than a decade. Although Ralfs contends the extensions were given for less than adequate consideration, the record reveals the Mowrys rented adjoining ground at $125 per acre, less than the $130 per acre paid under the leases in question. While the record supports an inference that King was struggling financially, it is far from clear that she was insolvent.
See First Nat’l Bank v. Frescoln Farms, Ltd.,
These facts differ markedly from those revealed in
Graham v. Henry,
for example, where a “sham” farm lease between parents and their children was executed for the sole purpose of avoiding an imminent contract forfeiture.
Graham,
No such pretense has been proven here. The landlord-tenant relationship between King and Mowrys was legitimate and longstanding. The lease terms, while arguably favorable to Mowrys, were by no means out of line. When Ralfs took title to the farm in 1996, he was well aware the ground was leased through the 1998 crop year. The record, taken as a whole, fails to support Ralfs’ claim of fraudulent сonveyance. We affirm the district court’s dismissal of the action.
B. Accounting. Ralfs also contests the district court’s finding that he must pay an additional $29,006.55 plus accrued interest to satisfy Mowrys’ outstanding mortgage on the property. The court of appeals adjustеd the figure downward. Mowrys do not specifically address the modification in their application for further review.
As aptly noted by the district court, the parties’ numerous accounting exhibits are “confusing and contradictory.” The court ultimately relied on an exhibit prepared by Mowrys as the document most accurately
*374
reflecting the agreements between Mowrys and King. We are convinced, however, that to the extent the exhibit includes a $15,000 advance by Mowrys that was not secured under the originаl mortgage, the court’s reliance on it was misplaced.
See Decorah State Bank v. Zidlicky,
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED AS MODIFIED.