Bank of Am., N.A. v. Schulte

• Decision Date: 07 March 2014
• Docket Number: No. 13–0071.,13–0071.
• Citation: 843 N.W.2d 876
• Parties: BANK OF AMERICA, N.A., as Successor by Merger to BAC Home Loans Servicing, L.P. f/k/a Countrywide Home Loans Servicing, LP, Appellee, v. Scott A. SCHULTE and Marisel Del Valle a/k/a Maritza I. Del Valle, Appellants.
• Court: Iowa Supreme Court

843 N.W.2d 876

BANK OF AMERICA, N.A., as Successor by Merger to BAC Home Loans Servicing, L.P. f/k/a Countrywide Home Loans Servicing, LP, Appellee,

v.Scott A. SCHULTE and Marisel Del Valle a/k/a Maritza I. Del Valle, Appellants.

No. 13–0071.

Supreme Court of Iowa.

March 7, 2014.

Gary J. Shea of Gary J. Shea Law Offices, Cedar Rapids, for appellants.

Brian C. Walsh and Kevin M. Abel of Bryan Cave L.L.P., St. Louis, Missouri, for appellee.

ZAGER, Justice.

Almost two years after entry of a foreclosure decree, Bank of America, N.A. (Bank of America) sought to have its foreclosure action rescinded pursuant to Iowa Code section 654.17. Contemporaneously, Bank of America also filed a motion to set aside decree and obtained an ex parte order from the district court setting aside the decree. Scott Schulte and Marisel Del Valle, whose real property had been foreclosed, opposed the motion to set aside decree. They argued neither the motion nor the notices of rescission were timely filed within one year of the entry of judgment as required by Iowa Rules of Civil Procedure 1.1012 and 1.1013 and were therefore barred under the applicable statute of limitations. The district court concluded a two-year limitations period applied under Iowa Code section 654.17. Accordingly, the district court found the rescission notices timely filed and granted Bank of America's motion to set aside the decree. Schulte and Del Valle appealed, and we retained the appeal. For the reasons set forth below, we affirm.

I. Background Facts and Proceedings.

On June 29, 2009, Scott Schulte executed a promissory note for $228,759 in favor of Liberty Bank, F.S.B. (Liberty Bank). That same date, as security for payment of the note, Schulte and Marisel Del Valle executed a mortgage on real property in favor of Mortgage Electronic Registration Systems, Inc., Liberty Bank's nominee. The note and mortgage were later assigned to BAC Home Loans Servicing, L.P. (BAC).

In May 2010, BAC filed a foreclosure petition alleging Schulte was in default on the note and sought to foreclose on the mortgage. Schulte and Del Valle, acting pro se, answered the petition and admitted Schulte was in default on the note. In July, BAC moved for summary judgment, and Schulte and Del Valle did not resist. The district court granted the motion for summary judgment. On August 17, 2010, the district court entered a decree of foreclosure.

The next day, the clerk of court issued an execution. A “Notice of Sheriff's Levy and Sale” was issued on August 31. According to the notice, the sheriff's sale of the foreclosed real property was scheduled to take place in February 2011. For unknown reasons, the sale was later cancelled.

In February 2011, attorney Gary J. Shea entered an appearance on behalf of Schulte and Del Valle. Counsel requested that he and his clients be provided notice of any scheduled sheriff's sale. In July, BAC's attorney withdrew, Bank of America as successor by merger to BAC was added to the caption, and a new attorney entered an appearance on behalf of Bank of America. No motion was made, nor order entered, to substitute Bank of America as the real party in interest.

In March 2012, the clerk issued another execution, and a second “Notice of Sheriff's Levy and Sale” was issued. According to the notice, the sale of the foreclosed real property was scheduled to take place in May. As with the first sale, this second sale was also cancelled.

On July 24, 2012, Bank of America filed a “Notice of Rescission of Foreclosure” with the clerk of court pursuant to Iowa Code section 654.17. This notice was served by regular mail on Schulte and Del Valle but not on their attorney as required by the rules of civil procedure. In compliance with Iowa Code section 654.17(1), Bank of America paid a filing fee of fifty dollars to the clerk of the district court as well as twenty-five dollars to the clerk of the district court for the return of the original loan documents. At that same time, Bank of America also filed a “Motion to Set Aside Decree” requesting that the court set aside the foreclosure decree entered on August 17, 2010. It also requested that the underlying mortgage remain in full force and effect. On July 26, 2012, the district court granted the motion and entered an order setting aside the foreclosuredecree and ordered the mortgage to remain in full force and effect.

On August 10, Schulte and Del Valle filed a motion captioned “Defendants' Rule 1.904(2) Motion” requesting the court reconsider and amend its July 26 order setting aside the foreclosure decree.¹ Schulte and Del Valle argued that the motion to set aside the decree was presented to the court ex parte, without proper notice upon their attorney, and without an opportunity for a hearing. They also argued that the motion was not filed within one year of the entry of the judgment as required by Iowa Rules of Civil Procedure 1.1012 and 1.1013, so it was time barred. Finally, they argued that because the motion was time barred, the notice of rescission was also unenforceable by operation of this statute of limitations. Schulte and Del Valle requested the court deny Bank of America's motion.

On August 14, 2012, Bank of America filed a “Supplemental Notice of Rescission of Foreclosure” with the clerk of court and properly served this supplemental notice on counsel for Schulte and Del Valle. This notice again stated the foreclosure decree entered on August 17, 2010, was rescinded. Six days later, Bank of America filed a resistance to Schulte and Del Valle's purported rule 1.904(2) motion, arguing the notice of rescission was timely because it was filed within the applicable two-year statute of limitations as provided for in Iowa Code section 615.1.

On August 30, the district court entered an order vacating its July 26 order which had granted the motion to set aside the decree. The order does not include any reference to the notice of rescission or the supplemental notice of rescission. Because the court vacated the order, it found the relief sought by Schulte and Del Valle in their motion moot. The court did, however, set a hearing on Bank of America's motion.

In October, the district court held a hearing on the motion to set aside the decree. That same day, Schulte and Del Valle filed a written resistance to the motion primarily arguing that valid service had not been obtained on counsel. Three days after the hearing, Schulte and Del Valle filed a “Supplemental Resistance to Plaintiff's Motion to Set Aside Decree.” Schulte and Del Valle noted that Bank of America was not properly substituted as the plaintiff and argued for the first time that the failure by Bank of America to serve their attorney of record with a copy of the notice of rescission violated their procedural and substantive due process rights under the Federal and Iowa Constitutions.

In its December 13, 2012 ruling, the district court first found that the August 30 order vacating the order setting aside the foreclosure did not set aside the foreclosure as a final matter requiring either an appeal or a rule 1.904 motion. Rather, the order was merely to set the matter for hearing so that Schulte and Del Valle could present their resistance.

In its ruling, the district court rejected Schulte and Del Valle's argument that the notice of rescission was untimely because it was not filed within one year of the entry of the foreclosure decree. Instead, the district court concluded that the statute of limitations referenced in Iowa Code section 654.17 involved the two-year statute of limitations as found in Iowa Code section 615.1. The district court also concluded that Bank of America exercised its rights in a proper and timely manner to rescind the foreclosure action. Lastly, the district court concluded that pursuant to the language of Iowa Code section 654.17, the rescission operates as a setting aside of the decree of foreclosure and a dismissal of the foreclosure without prejudice. Accordingly, the district court granted Bank of America's motion to set aside the decree. Schulte and Del Valle appealed, and we retained the appeal.

II. Standard of Review.

Foreclosure proceedings are equitable proceedings. Iowa Code § 654.1 (2011).² Generally, we review equitable proceedings de novo. Chi. Cent. & Pac. R.R. v. Calhoun Cnty. Bd. of Supervisors, 816 N.W.2d 367, 370 (Iowa 2012). Because this dispute raises an issue of statutory interpretation, however, our review is for correction of errors at law. Id.

III. Discussion.A. Statutory Interpretation of Iowa Code section 654.17(1).

The major dispute in this case requires us to interpret Iowa Code section 654.17(1). When interpreting statutes, we seek the legislature's intent. Schaefer v. Putnam, 841 N.W.2d 68, 75 (Iowa 2013). Words or phrases that are undefined in the statute or for which there is no established legal meaning are given their common, ordinary meaning in the context within which they are used. In re Estate of Bockwoldt, 814 N.W.2d 215, 223 (Iowa 2012). Rather than analyzing words or phrases in isolation, we assess the entire statute. Hardin Cnty. Drainage Dist. 55, Div. 3, Lateral 10 v. Union Pac. R.R., 826 N.W.2d 507, 512 (Iowa 2013). We consider a statute's legislative history, including prior versions of the statute. State v. Romer, 832 N.W.2d 169, 176 (Iowa 2013). Under the pretext of construction, we may not extend a statute, expand a statute, or change its meaning. Id. On the other hand, we look no further than the language of the statute when it is unambiguous. Estate of Ryan v. Heritage Trails Assocs., Inc., 745 N.W.2d 724, 730 (Iowa 2008). A statute is ambiguous if reasonable people can disagree about its meaning. Bockwoldt, 814 N.W.2d at 223. We do not believe the statute at issue in this case is ambiguous.

The dispute in this case is straightforward. Iowa Code section 654.17(1), in part, provides:

1. At any time prior to the recording of the sheriff's deed, and before the...