ACC Holdings, LLC v. Rooney

• Citation: 973 N.W.2d 851
• Decision Date: 29 April 2022
• Docket Number: 21-0479
• Parties: ACC HOLDINGS, LLC, Appellee, v. Todd ROONEY, Appellant, and Parties in Possession, Defendants.
• Court: United States State Supreme Court of Iowa

973 N.W.2d 851

ACC HOLDINGS, LLC, Appellee,

v. Todd ROONEY, Appellant,andParties in Possession, Defendants.

No. 21-0479

Supreme Court of Iowa.

Submitted March 23, 2022

Filed April 29, 2022

David R. Elkin of Law Office of David R. Elkin, Des Moines, for appellant.

Cameron K. Wright and R. Bradley Skinner of Skinner Law Office, P.C., Altoona, for appellee.

Mansfield, J., delivered the opinion of the court, in which all justices joined.

MANSFIELD, Justice.

I. Introduction.

Iowa Rule of Civil Procedure 1.943 allows plaintiffs to dismiss their petitions without prejudice and start over—once. In this case, a tax deed holder tried to stretch the limits of this rule in a forcible entry and detainer (FED) action. Twice, the tax deed holder purported to dismiss without prejudice its FED petition against the property owner who had failed to pay taxes. Twice, the tax deed holder refiled.

Under rule 1.943, a second voluntary dismissal operates as an "adjudication on the merits" unless the court orders otherwise in the interest of justice at or before the time of dismissal. Yet the district court allowed the third FED action to go forward. We believe this was in error. The third action involved the same tax deed and the same continued occupancy as the two prior actions; therefore, it involved the same claim. For this reason, we reverse the judgment of the district court granting the tax deed holder possession of the property and remand for dismissal of this action. Our dismissal, however, does not preclude the tax deed holder from bringing a quiet-title action.

II. Facts and Procedural History.

Todd Rooney owned a home at 2103 Shady Lane Drive in Norwalk, where he has lived since 1987. Rooney failed to pay property taxes to the Warren County Treasurer for the 2015 year. His home eventually went to tax sale on June 19, 2017. ACC 298 LLC and Dutrac purchased the property for $2,985—the amount then unpaid.

Rooney did not redeem the property. Instead, after nearly three years had elapsed, ACC 298 and Dutrac served a final notice to redeem on May 6, 2020. See Iowa Code § 447.9(1) (2017). The notice advised Rooney that if he failed to redeem the house within ninety days, the right of redemption would expire, and ACC 298 and Dutrac would receive a deed to the property. Rooney still did not redeem the property, so on August 26, ACC Holding LLC (ACC), as assignee of ACC 298 and Dutrac, obtained a tax deed.

On September 22, ACC arranged for its first three-day notice to quit to be served on Rooney. Eight days later, on October 1, ACC filed its first FED action against Rooney with the small claims division of the Warren County District Court. The petition alleged that Rooney was "possessing the property after the issuance of a valid tax deed." Rooney moved to dismiss the first FED for lack of subject matter jurisdiction on the ground that the small claims division does not have jurisdiction over FED actions based on tax deeds. See id. § 631.1(2). On October 16, before the small claims court had ruled on Rooney's motion to dismiss, ACC voluntarily dismissed its first FED action without prejudice.

Meanwhile, on October 15, one day before dismissing its small claims petition, ACC had already filed its second FED action—this time in the district court itself. Attached to this petition was the same September 22 notice to quit that had accompanied the petition previously filed in small claims court. On December 22, without stating a reason, ACC voluntarily dismissed the second FED petition.

Once again, ACC had already filed another FED action. On December 21, ACC brought its third FED petition. This petition was also filed in the Warren County District Court and alleged that Rooney "remain[ed] in possession after the issuance of a valid tax deed." Attached to this petition was a new three-day notice to quit that had been served on December 15.

An FED hearing was set for January 5, 2021. On January 4, Rooney answered and moved for summary judgment. He asserted three defenses: (1) the two-dismissal rule of Iowa Rule of Civil Procedure 1.943, (2) the thirty-days’ peaceable possession defense in Iowa Code section 648.18, and (3) a claim that he had a legal disability entitling him to additional time to redeem the property pursuant to Iowa Code section 447.7. Regarding the third defense, Rooney asserted that on October 15, 2020, he had filed a separate action challenging the tax deed sale on the basis of legal disability. See id. § 447.7(3) (providing that the person with a legal disability forfeits any right of redemption when an action for possession is brought unless that person files a counterclaim or a separate action).

At the hearing, the parties presented legal argument on the first two issues. They also agreed that the district court could try the issue of whether Rooney has a legal disability. Concerning that third issue, Rooney testified that he has had a reading disability since fourth grade. But he acknowledged that he ended up graduating from college and owning a concrete contracting business. He said that he's "very good" at what he does and "[has] been doing it for twenty years." Rooney also explained that he had been injured in a hunting accident about a year and a half earlier that left him temporarily paralyzed below the waist and still caused him considerable pain. Rooney admitted that he handled the secretarial work for his concrete business "and worked with the taxes and stuff." Rooney also admitted that he handled the preparation of his own personal income tax returns.

On March 14, the district court entered an order denying Rooney's motion for summary judgment and awarding possession to ACC. On the first issue, the court held that the voluntary dismissals of the previous FED actions by ACC "were not final adjudications pursuant to Iowa R. Civ. P. 1.943." On the matter of thirty days’ peaceable possession, the court reasoned that Rooney's ongoing possession of the property "g[ave] rise to new causes of action as time passe[d]." Finally, the court found the evidence insufficient to establish Rooney had a legal disability.

Rooney appealed, and we retained the appeal.

III. Standard of Review.

"Forcible entry and detainer actions are equitable actions, and therefore our scope of review is de novo." Porter v. Harden , 891 N.W.2d 420, 423–24 (Iowa 2017).

IV. Legal Analysis.

A. Impact of the Two-Dismissal Rule on ACC's Third FED Action. Iowa Rule of Civil Procedure 1.943 provides,

A party may, without order of court, dismiss that party's own petition, counterclaim, cross-claim, cross-petition or petition of intervention, at any time up until ten days before the trial is scheduled to begin. Thereafter a party may dismiss an action or that party's claim therein only by consent of the court which may impose such terms or conditions as it deems proper; and it shall require the consent of any other party asserting a counterclaim against the movant, unless that will still remain for an independent adjudication. A dismissal under this rule shall be without prejudice, unless otherwise stated; but if made by any party who has previously dismissed an action against the same defendant, in any court of any state or of the United States, including or based on the same cause, such dismissal shall operate as an adjudication against that party on the merits, unless otherwise ordered by the court, in the interests of justice.

(Emphasis added.)

Notwithstanding the district court's reasoning, we think it is clear that each voluntary dismissal was final. See Valles v. Mueting , 956 N.W.2d 479, 484 (Iowa 2021) (stating that a voluntary dismissal "was self-executing and marked the date of finality for appeal purposes"). Also, it is clear that the first two FED actions involved the same cause of action because they relied on the very same three-day notice to quit. Therefore, pursuant to rule 1.943, the voluntary dismissal of the second FED action "operate[d] as an adjudication ... on the merits, unless otherwise ordered by the court, in the interests of justice."

In Smith v. Lally , 379 N.W.2d 914 (Iowa 1986), we expounded on the meaning of this final clause of rule 1.943 (which was then known as rule 215). In Smith , the plaintiffs filed a medical malpractice action originally in Johnson County. Id. at 915. When the defendants moved for a change of venue, the plaintiffs refiled in Scott County and voluntarily dismissed without prejudice their Johnson County action. Id. Again the defendants moved for a change of venue, and again the plaintiffs refiled—this time in Dubuque County—and dismissed their Scott County action without prejudice. Id. We held that the two-dismissal rule barred the plaintiffs’ action in Dubuque County even though the plaintiffs had brought their new actions before voluntarily dismissing their old ones. Id. at 915–16. We explained, "The purpose of the rule is to prevent indiscriminate dismissals of actions by litigants. Repeated filings and dismissals obviously have a harassing effect that the two-dismissal rule is designed to prevent." Id. at 916 (citation omitted).

We also found that the Scott County district court had correctly ruled that it could not "enter a subsequent order determining in the interests of justice that the dismissal would not constitute an adjudication against plaintiffs on the merits." Id. "[S]uch a determination could only be made before or contemporaneously with the dismissal." Id.

Given Smith v. Lally , the only open question is what significance the adjudication on the merits of ACC's second FED action holds for ACC's third FED action. ACC maintains that its third FED action was a new and separate claim based on Rooney's continued occupancy of 2103 Shady Lane Drive during the fall of 2020. We disagree.

In this case, the third FED action involved the same transaction as the first two. It didn't present new conduct (i.e., conduct that didn't exist before) or an additional breach (e.g., the failure to pay additional monies)....