Olympus Aluminum Products, Inc. v. Kehm Enterprises, Ltd., No. C 96-3056-MWB.

• Court: United States District Courts. 8th Circuit. Northern District of Iowa
• Writing for the Court: BENNETT
• Citation: 930 F. Supp. 1295
• Docket Number: No. C 96-3056-MWB.
• Decision Date: 09 July 1996
• Parties: OLYMPUS ALUMINUM PRODUCTS, INC., a Minnesota corporation, Plaintiff, v. KEHM ENTERPRISES, LTD., d/b/a Kehm Electric, Kehm Properties, L.C., and Liberty Bank & Trust, an Iowa corporation, Defendants.

930 F. Supp. 1295

OLYMPUS ALUMINUM PRODUCTS, INC., a Minnesota corporation, Plaintiff,
v.
KEHM ENTERPRISES, LTD., d/b/a Kehm Electric, Kehm Properties, L.C., and Liberty Bank & Trust, an Iowa corporation, Defendants.

No. C 96-3056-MWB.

United States District Court, N.D. Iowa, Central Division.

July 9, 1996.

930 F. Supp. 1296

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930 F. Supp. 1297

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930 F. Supp. 1298

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930 F. Supp. 1299

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930 F. Supp. 1300

David Nelson of the Nelson Law Office, Mason City, Iowa, and Lawrence H. Crosby of Crosby & Associates, Saint Paul, Minnesota, for Plaintiff Olympus

David Johnson of Brinton, Bordwell & Johnson in Clarion, Iowa, Frank Baron of Baron, Sar, Goodwin, Gill, Lohr & Horak in Sioux City, Iowa, for Kehm Defendants.

Thomas H. Burke and Bernard L. Spaeth, Jr., of Whitfield & Eddy, P.L.C., Des Moines, Iowa, for Defendant Liberty Bank & Trust.

MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S COMPLAINT FOR DECLARATORY JUDGMENT

BENNETT, District Judge.

 TABLE OF CONTENTS
                 I. INTRODUCTION ......................................................... 1301
                 A. Procedural Background ............................................. 1301
                 B. Findings Of Fact .................................................. 1303
                 II. LEGAL ANALYSIS ....................................................... 1304
                 A. Standards For Declaratory Judgments ............................... 1304
                 1. "Case or controversy" .......................................... 1304
                 2. "Standing" ..................................................... 1304
                 3. Discretion ..................................................... 1304
                 B. The Statutory Maze ................................................ 1308
                 1. Interpretation of state law by federal courts .................. 1310
                 2. Rules of statutory interpretation .............................. 1311
                 3. Interpretation of the statutes involved ........................ 1313
                 C. Relief ............................................................ 1316
                III. CONCLUSION ........................................................... 1316
                

With nearly as much trepidation as Theseus must have felt entering the Labyrinth of the Minotaur,¹ this federal court enters a maze created by state statutes unenlightened by any applicable decisions of the state's highest courts. The court is asked to decide a question of first impression, whether the holder of a mechanic's lien who had not reduced his lien to judgment could properly redeem real property under Iowa's alternative voluntary non-judicial foreclosure procedure. The declaratory plaintiff is leasing certain real property for its manufacturing plant and fears ejection by a party who redeemed the property in voluntary non-judicial foreclosure proceedings. Because the redeeming party had only a mechanic's lien that had not been reduced to judgment against the real property, the declaratory plaintiff asserts the redemption is barred by statute. The plaintiff's argument is based on Iowa Code § 628.6, which states that a mechanic's lien before judgment thereon is not of such character as to entitle the holder to redeem. On the strength of this statute, the plaintiff asks the court to undo the redemption as the product of mistake or inadvertence. The redeeming party and the bank that permitted the redemption contend that there was no mistake, and that the redemption was proper. They argue that the statutory provision cited by the plaintiff simply does not apply to non-judicial foreclosures. Instead, they assert that the redemption was

930 F. Supp. 1301

controlled by Iowa Code §§ 654.18 and 628.29, which provide for redemption in non-judicial foreclosures by any "lienholder of record." The court cannot retreat from the maze created by these statutes, as Theseus retreated from the Labyrinth, by following a thread unraveled from its robe.² Instead, the court must interpret the statutory provisions creating the maze in such a way that legislative intent is served and the interplay of the statutes clarified

I. INTRODUCTION

A. Procedural Background

Plaintiff Olympus Aluminum Products, Inc., a Minnesota corporation with its principal place of business in Eden Prairie, Minnesota, filed a complaint for declaratory judgment, temporary restraining order (TRO), and temporary injunction on June 14, 1996. The defendants are Kehm Enterprises, Ltd., d/b/a Kehm Electric, and Kehm Properties, L.C. (collectively, "Kehm"), and Liberty Bank & Trust ("Liberty"), an Iowa corporation with its principal place of business in Mason City, Iowa. At the center of this dispute are two outlots in an industrial park in Mason City, including the building thereon, currently occupied by Olympus and used by it as its manufacturing facility for aluminum windows, doors, and other products. Kehm had redeemed the real property from Liberty in the course of voluntary non-judicial foreclosure proceedings of a mortgage against the previous owner of the property, Alpana Aluminum Products, Inc. Olympus asserts that Kehm's redemption is the product of mistake or inadvertence, and therefore must be undone by the court in these proceedings.

Olympus's complaint sought three kinds of relief: first, a TRO restraining Kehm from conveying or encumbering the premises in question; second, a declaration and order that Kehm, through the mechanic's lien it held on the real property in question, did not have a lien of sufficient character to entitle it to redeem the real property from Liberty in non-judicial foreclosure proceedings; and, third, an order to Kehm to provide a Special Warranty Deed for the real property back to Liberty. The complaint asserts diversity jurisdiction pursuant to 28 U.S.C. § 1332 and venue pursuant to 28 U.S.C. § 1391(a).

Following preliminary proceedings, and upon agreement of the parties, the court issued a TRO on June 18, 1996. The TRO enjoined defendants from transferring, encumbering, assigning, pledging, trading to any person, known or unknown, or engaging in any other method or fashion or transaction that would affect the right, title and interests as well as possession of the premises in question.³ The court ordered that the TRO would issue upon the giving of security of $20,000 by Olympus, which security was posted on June 21, 1996. The parties requested an expedited trial on the merits of this action, and the court set aside July 1, 1996, for such a trial in Fort Dodge, Iowa. Consequently, in the TRO, the court also ordered that the issuance of the TRO and the amount of the bond would be subject to review upon written motion of the defendants if this matter did not proceed to trial on the merits on July 1, 1996, owing to a cause not attributable to defendants. The court further ordered that the TRO would remain in full force and effect until further order of this court.

This matter did proceed to hearing on July 1, 1996, in Fort Dodge, Iowa. At that hearing, plaintiff Olympus was represented by counsel David Nelson of the Nelson Law Office in Mason City, Iowa, and Lawrence H. Crosby of Crosby & Associates in Saint Paul, Minnesota. The Kehm defendants were represented by David Johnson of Brinton, Bordwell

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& Johnson in Clarion, Iowa, and Frank Baron of Baron, Sar, Goodwin, Gill, Lohr & Horak in Sioux City, Iowa. Defendant Liberty Bank & Trust, which had not appeared in preliminary proceedings, but had consented to the issuance of a TRO, appeared at the July 1, 1996, hearing through counsel Thomas H. Burke and Bernard L. Spaeth, Jr., of Whitfield & Eddy, P.L.C., in Des Moines, Iowa. At the hearing on July 1, 1996, the parties consented, on the record, to the consolidation of the trial of the action on the merits with the action for a preliminary injunction, pursuant to Fed.R.Civ.P. 65(a)(2)

In the interim between issuance of the TRO and the consolidated hearing and trial on the merits, all defendants answered the complaint for declaratory judgment and injunctive relief. Kehm answered the complaint on June 24, 1996, and filed an amended answer on June 26, 1996.⁴ Liberty answered the complaint on June 28, 1996. The positions of the parties were further clarified by pre-trial briefs filed by Kehm, on June 28, 1996, and by Olympus just prior to the trial on July 1, 1996.

At the hearing, Olympus presented various exhibits and the testimony of two witnesses. The first witness was Mr. Randall Arlan Hamborg, the Executive Vice President of Olympus. The second witness was J. Mathew Anderson, an attorney from Mason City who had represented Liberty in the course of the non-judicial foreclosure proceedings. Kehm also presented exhibits and the testimony of one witness, Mr. Theodore Kehm. Liberty presented no evidence or exhibits, although it participated in cross-examination of the witnesses of the other parties. Counsel for all parties also participated in closing arguments. At the conclusion of the trial on the merits, the court granted the parties leave to keep the record open for certain documents to which Mr. Kehm had referred in his testimony and such related evidence as Olympus might then desire to present. In a telephone conference held on July 3, 1996, the parties agreed to admission of certain exhibits proffered by Kehm, an affidavit of Theodore Kehm pertaining to those exhibits, and a report to the court on stipulations concerning the exhibits. Olympus indicated that it did not need to make any further submissions in response to the additions to the record. The parties therefore agreed that the evidentiary record would close with Kehm's submissions.

At the hearing on July 1, 1996, the court also granted the defendants until 5:00 p.m. on Friday, July 5, 1996, to fax post-trial briefs to the court, and granted plaintiff until 5:00 p.m. on Monday, July 8, 1996, to fax any reply brief to the court. All briefs were to be properly filed with the Clerk of Court by mail as soon thereafter as...