Schettler v. Iowa Dist. Court for Carroll County

Decision Date22 December 1993
Docket NumberNo. 92-1596,92-1596
Citation509 N.W.2d 459
PartiesElmer Joseph SCHETTLER and Schettler Seed Farms, Inc., Plaintiffs, v. IOWA DISTRICT COURT FOR CARROLL COUNTY, Defendant. Jane Mary SCHETTLER, Appellee, v. Elmer Joseph SCHETTLER and Schettler Seed Farms, Inc., Appellants, and James R. Van Dyke, Ronald W. Muhlbauer, and Olsen, Muhlbauer, Mahoney & Co., Defendants.
CourtIowa Supreme Court

Kay E. Dull, Sioux City, for plaintiffs.

Robert G. Allbee and David Swinton of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., Des Moines, for defendant.

Considered by LAVORATO, P.J., and NEUMAN, SNELL, ANDREASEN, and TERNUS, JJ.

LAVORATO, Justice.

Elmer Joseph Schettler and Schettler Seed Farms, Inc. (SSFI), "appeal" from a district court order denying their motion for sanctions against Thomas W. Polking, attorney for Elmer's former spouse, Jane Mary Schettler. Elmer casts himself as the disgruntled victim of successive and allegedly inconsistent postdivorce actions by Jane. He believes the action for fraud underpinning this "appeal" was nothing more than a furtive collateral attack by Polking on the property settlement in the dissolution of marriage decree.

Polking was not a party to the underlying fraud action. The challenge to the district court's refusal to sanction Polking should not, therefore, be deemed an appeal. See Weigel v. Weigel, 467 N.W.2d 277, 278 (Iowa 1991). We treat the "appeal" as a petition for a writ of certiorari and grant the writ. See id. The arguments of Jane who appears as "appellee" in the briefs will be considered on behalf of the district court, the defendant in the certiorari action.

The fraud action was dismissed on all defendants' summary judgment motions. Shortly before Jane filed a notice of appeal from the dismissal ruling, Elmer and SSFI filed a motion for sanctions against Polking.

During the pendency of the appeal the district court--acting on its own--ruled it would hold the motion for sanctions in abeyance until the appeal was decided. After the appeal was decided, the district court revisited the issue and reluctantly denied the motion for sanctions.

Elmer and SSFI raise several issues surrounding the district court's denial of the motion for sanctions. They argue that an attorney should have a continuing duty to obey the dictates of Iowa Rule of Civil Procedure 80(a), even though the attorney (1) does not sign all documents filed in the case, and (2) steps down as lead counsel but remains of counsel in the case.

And, they believe that, under the standard they propose, the district court abused its discretion when it failed to order sanctions against Polking and concluded SSFI had no standing regarding the motion for sanctions.

Because we find that the district court did not abuse its discretion in denying the motion for sanctions, we annul the writ of certiorari.

I. Background Facts.

Jane and Elmer were divorced in April 1984. A property settlement reached between the two was incorporated in the dissolution of marriage decree. This property settlement was based primarily on the value of SSFI, a family-owned corporation and seed business in which Jane had been a shareholder.

Jane's anticipated departure for Arizona in 1988 raised visitation issues regarding the Schettler children. In February 1988 she retained Polking to deal with these matters. An attorney other than Polking had represented Jane in the original dissolution of marriage proceeding.

After talking with Jane, Polking surmised that Elmer had, at the time of the dissolution of marriage proceeding, substantially undervalued SSFI. Polking told Jane of his suspicion and advised her that she should have received a more generous property settlement.

In March, on Jane's behalf, Polking filed an action to modify her dissolution of marriage decree. The modification action alleged a material and substantial change in circumstances since the decree as to the amount of child support and alimony necessary for the support of the children and Jane.

During the discovery process in the modification action, Polking obtained financial statements that he thought confirmed his suspicion. All of the statements were signed by Elmer; none were signed by Jane. Jane told Polking she had never seen the financial statements. Essentially the financial statements showed that Elmer's financial condition was substantially better than what he had represented it to be at the time of the dissolution of marriage proceeding.

With this revelation of Elmer's brighter financial picture, Polking felt he had a sufficient basis for filing a shareholder fraud action on Jane's behalf.

Polking filed such an action--the proceeding out of which this certiorari action arises--against Elmer, his accountant, and Jane's dissolution of marriage attorney. The petition alleged claims against (1) Elmer for fraud and breach of fiduciary duty over his alleged misrepresentation of the value of SSFI stock held by Jane before the dissolution of marriage decree, (2) Elmer's accountant for complicity in the fraud, and (3) Jane's dissolution of marriage attorney for complicity in the fraud.

Judge Mark Cady tried the modification action in March 1989. Judge Cady filed his ruling, awarding Jane an increase in child support but not in alimony. The judge made a finding that SSFI had "dramatically increased in value" following the dissolution of marriage. In February 1990 the court of appeals affirmed Judge Cady's ruling following Jane's appeal of it.

On the same day of Judge Cady's ruling in the modification action, Gary Ordway entered his appearance as lead counsel for Jane in the fraud case. According to Polking, he arranged for the change in counsel because he was "motivated by [his] concern that zealous representation of Jane in [the fraud] action might require assertion of claims against [his] cousin, who had formerly represented both Jane and SSFI." Polking maintained he remained of counsel in the case "because of his professional relationship with Jane."

The case proceeded toward trial. In February 1990 Ordway filed an amended petition adding SSFI as a defendant. Polking did not sign this document.

Elmer's accountant and his firm, and Elmer and SSFI, filed separate motions for summary judgment followed by separate motions for adjudication of law points. After a consolidated hearing, the district court sustained these motions on August 3, 1990.

II. Background Proceedings Regarding the Motion for Sanctions.

One month following the district court's rulings on the motions for summary judgment and adjudication of law points, Elmer and SSFI filed the motion for sanctions against Polking. About a week later Jane appealed from the district court's adverse summary judgment ruling.

The district court on its own initiative entered an order, shortly after Jane appealed, holding in abeyance a final ruling on the motion for sanctions until Jane's appeal was decided. Our court of appeals affirmed the district court ruling in December 1991. Our court denied Jane's application for further review, and procedendo issued on March 4, 1992.

The motion for sanctions lay dormant until April 28, 1992. On that date Elmer and SSFI filed a "motion to amend pleadings," seeking additional sanctions against Ordway and his firm.

Polking resisted the motion to amend on jurisdictional grounds. Following a hearing, the district court denied the motion to amend. The court denied the motion because it sought to add a new party without notice and asserted substantially additional grounds. But the court also concluded it still had jurisdiction to consider the original motion for sanctions.

Following a hearing, the district court denied the motion for sanctions. It is from this ruling that Elmer and SSFI "appeal."

III. Rule 80(a) Jurisdiction.

Jane contends that, once the procedendo was issued in the underlying fraud action, the district court lacked jurisdiction to rule on the motion for sanctions. She believes that a motion for sanctions is not separate from an appeal on the merits. Rather, she says, the motion is "inextricably entwined" with a determination of the merits in the underlying action.

In contrast, Elmer and SSFI argue that the motion concerns an issue collateral to the subject matter of the underlying fraud action. They think, for that reason, the district court retained jurisdiction to rule on the motion.

It is true that, once a notice of appeal is filed, the district court loses jurisdiction. But there is an exception. The district court "retains jurisdiction to proceed as to issues collateral to and not affecting the subject matter of the appeal." In re Estate of Tollefsrud, 275 N.W.2d 412, 418 (Iowa 1979).

Although the precise issue was not before the court, we think our discussion in a recent case makes it clear that a motion for sanctions is a collateral matter. See Darrah v. Des Moines General Hosp., 436 N.W.2d 53, 55 (Iowa 1989) (voluntary dismissals of medical malpractice actions did not divest district court of jurisdiction to hear sanction motions, which were filed within twenty-three days after the dismissals). In Darrah we said:

Although plaintiff accurately states the general rule that voluntary dismissal divests the court of jurisdiction, we recognize an exception that retains the court's authority to adjudicate the collateral problem created by prior wrongful conduct of the dismissing party warranting rule 80(a) sanctions.

Id.

This was made even more clear in Board of Waterworks Trustees v. City of Des Moines, 469 N.W.2d 700 (Iowa 1991). In that case the district court disposed of the plaintiff's lawsuit by granting the defendant's motion for judgment notwithstanding the verdict. The plaintiff did not appeal within Iowa Rule of Appellate Procedure 5 time limits. The district court then ruled on the plaintiff's motion for sanctions, denying it. The plaintiff later filed a timely appeal as to the ruling on the motion for sanctions. The plaintiff...

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