Lincoln Sav. Bank v. Emmert
| Citation | 986 N.W.2d 376 |
| Docket Number | 20-1663 |
| Decision Date | 24 February 2023 |
| Parties | LINCOLN SAVINGS BANK, Appellee, v. Debra D. EMMERT, Appellant, and Simpson Furniture Company, Emmert Management, LLC, Dale T. Emmert, Iowa Department of Revenue and Bergen Plumbing, Inc., Defendants. |
| Court | Iowa Supreme Court |
Gregg A. Geerdes (argued), Iowa City, for appellant.
David T. Bower (argued), Jeffrey W. Courter, and Roy R. Leaf of Nyemaster Goode, P.C., Des Moines, for appellee.
McDermott, J., delivered the opinion of the court in which all participating justices joined. McDonald and May, JJ., took no part in the consideration or decision of the case.
The initial steps in a typical lawsuit are straightforward. A plaintiff files a petition with the court that alleges a claim against a defendant and then serves the defendant with the petition. The defendant, in turn, files an answer or other document responding to the petition within a specified time. If the defendant fails to file any response by the deadline, the plaintiff may apply for a default judgment against the defendant.
But the law favors resolution of disputes on their merits, not through procedural defaults. And to help ensure that defaults are entered based on informed choice, not oversight, our rules of civil procedure require an extra step in the process. The court will not give a default judgment unless the plaintiff first sends, in writing, a "notice of intent" to file an application for default judgment. The notice serves as a move-it-or-lose-it warning that the plaintiff intends to ask for a default judgment unless the defendant files a response within ten days.
When a defendant is known to be represented by a lawyer, our rules require the plaintiff to send a copy of the notice of intent to the lawyer. The question in this appeal—one that this court has never been presented with in any previous case—is whether the plaintiff must send a copy of the notice of intent to the defendant in addition to the defendant's lawyer.
Debra Emmert and her then-husband owned and operated a furniture store and a related management company. The furniture store and management company took out about $5 million in loans from Lincoln Savings Bank. As security for the loans, the bank took mortgages on two properties, security interests in certain business and personal property, and a personal guaranty from Emmert. When loan payments failed to arrive, the bank filed a petition to foreclose the mortgages and security interests.
The bank served the foreclosure lawsuit on an attorney named Phillip Brooks. The parties dispute the scope of Brooks's representation of Emmert in this matter. Emmert argues that Brooks had represented her on a matter unrelated to the bank's foreclosure lawsuit (a replevin action), while the bank argues that Brooks was communicating and holding himself out as Emmert's lawyer in the foreclosure lawsuit. Putting aside for the moment questions about the scope of Brooks's representation, the record shows that Brooks filed an acceptance of service of the foreclosure petition on Emmert's behalf and that neither Brooks nor Emmert, nor anyone else acting on Emmert's behalf, filed any response to the petition.
After the deadline to file a responsive pleading had passed, the bank mailed a written notice of intent to file for a default judgment to Brooks. The bank did not separately mail any notice of intent to Emmert. A few months later, the bank filed its application for default judgment. The district court promptly entered a default judgment against Emmert and the other defendants.
Some months later, the bank asked the court for permission to amend the petition against the defendants (even though the court had already entered a default judgment) based on the bank's purchase of a senior mortgage on one of the foreclosed properties. The district court granted the bank permission to amend, and the bank refiled its petition against Emmert and the other defendants. The bank sent Brooks a copy of the newly-amended petition by certified mail.
The ensuing events began to unfold just as before. No one filed any response to the petition by the deadline. The bank mailed a written notice of intent to file for a default judgment to Brooks (but not to Emmert). The bank timely filed its application for default judgment, which the district court again promptly granted. The bank thereafter provided information to the district court for entry of a detailed foreclosure judgment that reflected the updated amount of the debt and other particulars.
But while that foreclosure judgment remained outstanding, lawyer Gregg Geerdes filed an appearance in the case on Emmert's behalf. Geerdes filed no other documents with his appearance. About three weeks later, the court entered the foreclosure judgment against Emmert and the other defendants. Within a couple of hours, Geerdes filed a motion asking the court not to enter the foreclosure judgment (too late, as it turned out) or, in the alternative, to set aside the foreclosure judgment.
The district court took no action on Geerdes's motion not to enter, or to set aside, the foreclosure judgment. Two weeks later, Emmert (represented by Geerdes) appealed the foreclosure judgment. Nearly two months after filing the appeal, she moved in the district court to set aside the default judgment and to enlarge and reconsider the foreclosure judgment. We transferred the appeal to the court of appeals. The court of appeals correctly concluded that the district court lacked the power to rule on the motions filed after her notice of appeal because her appeal divested the district court of jurisdiction. See State v. Mallett , 677 N.W.2d 775, 777 (Iowa 2004). On Emmert's other claims, the court of appeals determined that the bank satisfied the notice rule by mailing the notice of intent only to Brooks and affirmed the district court's default judgment. Emmert applied for further review, which we granted.
Emmert is the only defendant challenging the notice and the resulting default judgment. She makes two arguments relevant to our resolution of this appeal, both centered on the "notice of intent" that the bank was required to send. First, she argues that notice to Brooks was improper because Brooks was not her attorney and had never been the attorney of record in this matter. Second, she argues that even if Brooks had been serving as her lawyer in this matter, sending notice to Brooks alone wasn't enough—the bank needed to send the notice of intent to her in addition to her lawyer.
The outcome of this appeal hinges on our construction of Iowa Rule of Civil Procedure 1.972, which is the rule that sets out the requirements for obtaining a default judgment. We review the interpretation of our rules of civil procedure under a "correction of errors at law" standard, and thus we conduct our own analysis without deference to the lower court's interpretation. See McGrew v. Otoadese , 969 N.W.2d 311, 319 (Iowa 2022). Failing to comply with the notice provisions of the rule leaves the district court "without authority to enter the order of default." Dolezal v. Bockes , 602 N.W.2d 348, 352 (Iowa 1999). Despite the untold hundreds (if not thousands) of cases that have ended in default judgments in Iowa courts in the decades since the notice-of-intent requirement came into being, we've somehow never had a case addressing the particular question before us.
The rule states in relevant part:
Emmert urges that we read paragraphs (a ) and (b ) of rule 1.972(3) as conjunctive, as if the list is joined by the word and , thus requiring notice to the party and also to the party's lawyer if the party is known to be represented. The bank, conversely, urges that we read paragraphs (a ) and (b ) as disjunctive, requiring notice to the party if the party is not known to be represented but requiring notice only to the lawyer if the party is known to be represented.
In 1997, we amended what is now rule 1.972 to include a notice-of-intent mailing requirement. That rule change followed our decision a few years earlier in Central National Insurance Co. of Omaha v. Insurance Co. of North America , 513 N.W.2d 750, 757 (Iowa 1994). In that case, a defendant tried to set aside a default judgment because the plaintiff failed to notify the defendant's lawyer before filing...
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