Slade v. M.L.E. Inv. Co., 95-1753

• Decision Date: 23 July 1997
• Docket Number: No. 95-1753,95-1753
• Citation: 566 N.W.2d 503
• Parties: Jeanne O. SLADE, Appellant, v. M.L.E. INVESTMENT CO., E.L.M. Trust and Edward L. McCoy, Appellees.
• Court: Iowa Supreme Court

Page 503

566 N.W.2d 503

Jeanne O. SLADE, Appellant, v. M.L.E. INVESTMENT CO., E.L.M. Trust and Edward L. McCoy, Appellees.

No. 95-1753.

Supreme Court of Iowa.

July 23, 1997.

Joseph L. Marks of Marks, Marks & Marks, Urbandale, for appellant.

Robert M. Holliday and James G. Sawtelle of Sullivan & Ward, P.C., Des Moines, for appellees.

Considered by McGIVERIN, C.J., and LAVORATO, NEUMAN, ANDREASEN, and TERNUS, JJ.

McGIVERIN, Chief Justice.

Plaintiff Jeanne Slade challenges the district court's dismissal of her petition that alleged defendants wrongfully obtained a foreclosure on a real estate mortgage and were unjustly enriched. Plaintiff also claims that the district court improperly imposed sanctions against her. We affirm in part and reverse in part.

I. Background facts and proceedings. This dispute stems from a loan agreement between plaintiff and one of the defendants.

A. Prior transactions. On October 9, 1991, plaintiff Jeanne Slade obtained a loan in the amount of $81,570.28 from defendant M.L.E. Investment Company (M.L.E.) in order to redeem two parcels of Des Moines real estate from foreclosure. Slade executed a promissory note in favor of M.L.E. for that amount. As part of the security for the loan, Slade executed a real estate mortgage on one of the parcels (hereinafter referred to as the Clark Street property), naming M.L.E. as mortgagee. As additional security, she executed a warranty deed to M.L.E. on the other parcel (hereinafter referred to as the Ohio Street property). Slade then repurchased the Ohio Street property for $81,570.28 by means of a real estate installment contract with M.L.E. Slade understood that M.L.E. could foreclose upon its mortgage and forfeit the real estate contract if she failed to repay the loan. Slade was represented by counsel in all of these transactions.

After making one partial payment on the loan, plaintiff Slade defaulted and made no other payments to M.L.E. On September 21, 1992, defendant M.L.E. served Slade with a notice of forfeiture of real estate contract (in connection with the Ohio Street property). See Iowa Code § 656.2 (1991). On October 21, 1992, the last day of the statutory thirty-day period for curing the default and avoiding forfeiture of the Ohio Street property, Slade filed an action in district court seeking to enjoin M.L.E. from proceeding with the forfeiture and foreclosure. She was represented by counsel in this action. On the same day, the district court denied Slade's request for an injunction. No appeal was taken from that ruling. Slade failed to cure the default within the thirty-day period provided by Iowa Code section 656.4; thus, the real estate contract was forfeited and M.L.E. owned the Ohio Street property outright upon making the proper filing with the county recorder on October 22, 1992. See id. § 656.5.

On November 5, 1992, M.L.E. started a mortgage foreclosure action in district court with regard to the Clark Street property. Again, plaintiff Slade was represented by counsel. During the foreclosure proceedings, Slade did not claim that the prior forfeiture had extinguished her debt to M.L.E., nor did she allege that M.L.E. would be unjustly enriched by taking title to both the Ohio Street and Clark Street properties. The district court entered judgment for M.L.E. against Slade, based on the promissory note, in the amount of $102,230.09 and foreclosed the mortgage on the Clark Street realty. Slade appealed, and we ultimately dismissed her appeal for want of prosecution. See Iowa R.App. P. 19(a). At the March 1993 sheriff's sale of the Clark Street property, M.L.E. bid $90,000 of its judgment against Slade and obtained a sheriff's deed to the property.

Later, defendant E.L.M. Trust entered into a contract to sell the Clark Street property to a third party for $25,000, and M.L.E. deeded that property to E.L.M. Trust. M.L.E. sold the Ohio Street property to another party for $80,000.

B. The present action. Plaintiff Slade filed the present equity action in district court, contending that the forfeiture of the Ohio Street property extinguished her debt to M.L.E. and that M.L.E. was unjustly enriched by its acquisition of both the Clark Street and Ohio Street properties. Slade alleged liability on the part of defendant E.L.M. Trust by virtue of the transfer of the Clark Street property from M.L.E. to E.L.M. Trust. She alleged that M.L.E. was the alter ego of defendant Edward L. McCoy and that McCoy was thus liable for actions by M.L.E.

Defendants filed a motion for sanctions against plaintiff Slade pursuant to Iowa Rule of Civil Procedure 80. Defendants contended Slade's claim had been adjudicated in previous actions, including Slade's action seeking an injunction in connection with the forfeiture of the Ohio Street property and the foreclosure action concerning the Clark Street property. They also pointed to Slade's motion seeking withdrawal of defendants' counsel filed several weeks before the trial.

After a bench trial, the court dismissed Slade's petition. It concluded that the forfeiture of the real estate contract for the Ohio Street property did not preclude foreclosure of the mortgage on the Clark Street property and that M.L.E. was not unjustly enriched because: (1) Slade failed, during the foreclosure proceedings, to raise her claim that the forfeiture of the Ohio Street property extinguished her debt to M.L.E.; (2) the bid submitted by M.L.E. at the sheriff's sale of the Clark Street property did not correspond to any benefit M.L.E. received by obtaining title to that property; and (3) Slade failed to prove by a preponderance of the evidence that M.L.E. was unjustly enriched as a result of the forfeiture and foreclosure. The court found no liability on the part of any of the defendants.

In a later order, following a hearing on defendants' motion for sanctions against plaintiff Slade, the trial court imposed sanctions against Slade pursuant to Iowa Rule of Civil Procedure 80(b). The court ordered that before prosecuting any further action against defendants, Slade must first furnish an undertaking secured by surety bond in the amount of $10,000.

Plaintiff Slade appealed both the dismissal of her petition and the imposition of sanctions against her.

II. Standard of review. Our review in this equity case is de novo. Iowa R.App. P. 4. We give weight to the trial court's findings of fact, especially with regard to the credibility of witnesses, but we are not bound by those findings. Iowa R.App. P. 14(f)(7). We ordinarily review the trial court's orders regarding sanctions for abuse of discretion. Breitbach v. Christenson, 541 N.W.2d 840, 845 (Iowa 1995).

III. Dismissal of plaintiff Slade's petition. On appeal, plaintiff Slade argues that the trial court improperly dismissed her petition against defendant M.L.E. She contends the court should have determined that the forfeiture of the Ohio Street property satisfied her obligation to M.L.E. for its loan to her and that M.L.E. was unjustly enriched by the foreclosure of the Clark Street property and title to that property being placed in M.L.E.

A. Effect of forfeiture of Ohio Street property on Slade's debt to M.L.E. Our procedural rules require parties to raise certain claims in a timely manner. Iowa Rule of Civil Procedure 101 provides:

Defenses to be specially pleaded. Any defense that a contract or writing sued on is void or voidable, or was delivered in escrow, or which alleges any matter in justification, excuse, release or discharge, or which admits the facts of the adverse pleading but seeks to avoid their legal effect, must be specially pleaded.

Iowa Rule of Civil Procedure 29 provides:

Compulsory counterclaims. A pleading must contain a counterclaim for every cause of action then matured, and not the subject of a pending action, held by the pleader against any opposing party and arising out of the transaction or occurrence that is the basis of such opposing par...