Benskin, Inc. v. W. Bank

• Decision Date: 23 December 2020
• Docket Number: No. 18-1966,18-1966
• Citation: 952 N.W.2d 292
• Parties: BENSKIN, INC., Appellant, v. WEST BANK, Appellee.
• Court: Iowa Supreme Court

952 N.W.2d 292

BENSKIN, INC., Appellant,

v.WEST BANK, Appellee.

No. 18-1966

Supreme Court of Iowa.

Submitted November 18, 2020

Filed December 23, 2020

Steven P. DeVolder (argued) of DeVolder Law Firm, P.L.L.C., Norwalk, and William W. Graham of Duncan Green, P.C., Des Moines, for appellant.

Dennis P. Ogden (argued) and Thomas L. Flynn of Brick Gentry, P.C., West Des Moines, for appellee.

Waterman, J., delivered the opinion of the court, in which all participating justices joined. McDermott, J., took no part in the consideration or decision of the case.

WATERMAN, Justice.

Motions to dismiss are disfavored. Iowa is a notice pleading state. Lawyers should exercise "professional patience" and challenge vulnerable cases by summary judgment or at trial instead of through "premature attacks on litigation by motions to dismiss." Cutler v. Klass, Whicher & Mishne , 473 N.W.2d 178, 181 (Iowa 1991). The court of appeals took such admonitions to heart and reversed the district court's ruling granting a bank's motion to dismiss its debtor's pleadings, alleging breach of contract, breach of the implied duties of good faith and fair dealing, fraud, and slander of title. The district court, examining the four corners of the debtor's amended petition, had ruled that the contract and fraud claims were time-barred, rejected the debtor's discovery rule and equitable estoppel arguments, and ruled the slander-of-title count failed to allege the element of publication to a third party. The court of appeals applied equitable estoppel to avoid the time-bar and held the slander-of-title count was adequately pled. We granted the bank's application for further review.

On our review, we determine that the district court correctly dismissed this case on the pleadings, except for slander of title. We accept as true the debtor's factual allegations. The bank's alleged wrongdoing—failure to release encumbrances—took place in 2008, and the debtor admittedly learned of the bank's refusal by June 27, 2011, well within the statute of limitations period. The contract and good-faith claims are subject to a seven-year statute of limitations with no discovery rule and that period expired in 2015. The fraud claim is governed by a five-year statute of limitations with a discovery rule and that period expired in 2016. The debtor did not file this lawsuit until May 18, 2018. Those claims are time-barred and the equitable estoppel argument fails as a matter of law. We agree with the court of appeals that slander of title was adequately alleged. Recording statutes provide notice to the public and a wrongful encumbrance on real estate is thereby "published." For the reasons explained more fully below, we vacate the decision of the court of appeals in part and affirm the district court's judgment dismissing all claims except slander of title, which we reinstate.

I. Background Facts and Proceedings.

According to the amended petition, on October 6, 2006, Benskin, Inc. entered into a written loan agreement with West Bank to borrow $800,094. The loan was secured by guarantees from Martin and Susan Benskin and a real estate mortgage on the corporation's property in Dickinson County. The terms of the loan were set forth in a promissory note (the 2006 promissory note), loan guarantees, and a real estate mortgage. The 2006 loan was renewed in a promissory note dated August 1, 2007, with a maturity date of August 1, 2008.

On October 24, 2007, Benskin entered into a separate agreement for a line of credit (the 2007 line of credit) with West Bank for up to $2 million to purchase land for development. The terms were set forth in a promissory note again secured by guarantees from Martin and Susan Benskin and mortgages on the Dickinson County land and this time on real estate Benskin owned in Polk County (the 2007 mortgages). Benskin never borrowed against the line of credit. On May 30, 2008, the 2007 promissory note and mortgages matured. "On and after that date, West Bank was obligated to release the 2007 Mortgages." Benskin alleged,

10. At various times after May 30, 2008, West Bank, through its officers and employees, made multiple representations, now known to have been false, that it would take the steps necessary to release the 2007 Mortgages.

11. Despite its obligation to release the 2007 Mortgages, and contrary to its representations and promises to do so, West Bank failed and refused to release the 2007 Mortgages, even after repeated requests and demands from Plaintiff.

12. Defendant's first express statement to Plaintiff refusing to release the 2007 Mortgages was on June 27, 2011. At least until that date, West Bank intentionally misled Plaintiff by making ... false statements and promises leading Plaintiff to believe that West Bank was going to release the 2007 Mortgages and was taking procedural steps to do so.

On July 22, 2016, during the course of other litigation, Benskin further alleged it

learned information indicating that at some time after the creation of the 2007 Line of Credit, West Bank internally altered its records so as to purport to show an unauthorized advance under the 2007 Line of Credit to pay off, before it was due, the 2006 Promissory Note. That action was wrongfully concealed by West Bank and was taken by West Bank without Plaintiff's agreement, consent, or knowledge and was not discovered by Plaintiff until after July 22, 2016.

The alleged misuse of the line of credit occurred in 2008. Benskin's property remained encumbered by the 2007 mortgages.

On May 18, 2018, Benskin sued West Bank in a three-count petition alleging breach of (I) the 2007 contracts, (II) the 2006 promissory note, and (III) the implied duties of good faith and fair dealing. West Bank filed a motion to dismiss on grounds that the seven-year statute of limitations in Iowa Code section 524.221(2) (2018) barred all claims. Benskin responded by amending its petition to add count IV, alleging fraud, and count V, alleging slander of title. West Bank withdrew its initial motion and filed a new motion to dismiss, arguing section 524.221(2) barred counts I–III, section 614.1(4) (five-year statute of limitations for fraud) barred counts IV and V, and count V failed to state a claim upon which relief could be granted because no publication to a third party was alleged. Benskin filed a resistance that argued for the ten-year statute of limitations in section 614.1(5) and further argued that the discovery rule or equitable estoppel avoided the limitations defense and the 2007 mortgage encumbrances as public filings satisfied the publication element for the slander of title.

The district court granted West Bank's motion to dismiss all claims. The court ruled that equitable estoppel can apply to breach of contract claims but determined that Benskin failed to allege a "specific statement or action as the basis of its equitable estoppel claim" and rejected its discovery rule argument. The court determined the first four counts were time-barred and that count V failed to state a claim for slander of title because no publication was alleged.

Benskin appealed, and we transferred the case to the court of appeals. The court of appeals reversed and reinstated all claims, holding that equitable estoppel was adequately pled to avoid a motion to dismiss on the statute of limitations and that the slander-of-title claim was adequately pled. We granted West Bank's application for further review.

II. Standard of Review.

"We review a district court's ruling on a motion to dismiss for the correction of errors at law." Shumate v. Drake Univ. , 846 N.W.2d 503, 507 (Iowa 2014) (quoting Mueller v. Wellmark, Inc. , 818 N.W.2d 244, 253 (Iowa 2012) ). "For purposes of reviewing a ruling on a motion to dismiss, we accept as true the petition's well-pleaded factual allegations, but not its legal conclusions." Id. "[W]e will affirm a dismissal only if the petition shows no right of recovery under any state of facts." Rieff v. Evans , 630 N.W.2d 278, 284 (Iowa 2001) (en banc) (quoting Barnes v. State , 611 N.W.2d 290, 292 (Iowa 2000) (en banc)). We construe the petition in "its most favorable light, resolving all doubts and ambiguities in [the plaintiff's] favor."

Id. (quoting Schreiner v. Scoville , 410 N.W.2d 679, 680 (Iowa 1987) ).

"A defendant may raise the statute of limitations by a motion to dismiss if it is obvious from the uncontroverted facts contained in the petition that the applicable statute of limitations bars the plaintiff's claim for relief." Venckus v. City of Iowa City , 930 N.W.2d 792, 809 (Iowa 2019) (quoting Turner v. Iowa State Bank & Tr. Co. of Fairfield , 743 N.W.2d 1, 5 (Iowa 2007) ); see also Mormann v. Iowa Workforce Dev. , 913 N.W.2d 554, 557, 575 (Iowa 2018) (affirming order granting motion to dismiss and noting that whether discovery rule and equitable estoppel apply "is often a fact-intensive inquiry for which a ruling on a motion to dismiss or at the summary judgment stage is often inappropriate. Yet, it is also true that a plaintiff may plead himself out of court by alleging facts that provide the [defendant] with a bulletproof defense and foreclose application of equitable tolling." (citation omitted)).

III. Analysis.

We will first address the applicable statute of limitations and conclude the contract claims are governed by the seven-year limitation in Iowa Code section 524.221(2)¹ and the fraud claim is governed by the five-year limitation in section 614.1(4). We then determine that based on the factual allegations in the amended petition, neither the discovery rule nor equitable estoppel avoid those limitations. Finally, we determine that the publication element of slander of title was adequately alleged because the recording statute provides notice to the public.

A. The Governing Statutes of Limitation.

1. Counts I and II, alleging breach of written contracts. The district court ruled that Iowa Code section 524.221(2) provides the governing statute of limitations for counts I and II of...