Standard Water Control Sys., Inc. v. Jones

• Decision Date: 07 February 2020
• Docket Number: No. 17-2009,17-2009
• Citation: 938 N.W.2d 651
• Parties: STANDARD WATER CONTROL SYSTEMS, INC., Appellee, v. Michael D. JONES and Cori Jones, Appellants. Michael D. Jones and Cori Jones, Counterclaim Plaintiffs, v. Standard Water Control Systems, Inc., Counterclaim Defendant.
• Court: Iowa Supreme Court

938 N.W.2d 651

STANDARD WATER CONTROL SYSTEMS, INC., Appellee,

v.Michael D. JONES and Cori Jones, Appellants.

Michael D. Jones and Cori Jones, Counterclaim Plaintiffs,

v.Standard Water Control Systems, Inc., Counterclaim Defendant.

No. 17-2009

Supreme Court of Iowa.

Filed February 7, 2020

John F. Fatino, Jonathan Kramer, and Zachary J. Hermsen of Whitfield & Eddy, P.L.C., Des Moines, for appellants.

Jodie C. McDougal and Elizabeth R. Meyer of Davis Brown Law Firm, Des Moines, for appellee.

MANSFIELD, Justice.

I. Introduction.

Long-running litigation, like a species in the order lepidoptera, often goes through a metamorphosis. The difference is that the final stage of a legal metamorphosis is not a butterfly. Rather, as here, it is frequently a battle over attorney fees.

In June 2013, certain homeowners hired a contractor to waterproof their basement. After the contractor accidentally drilled into the house’s water and sewer lines, which were in an unusual location, the homeowners refused to pay the contractor’s bill. The contractor then sued to enforce a mechanic’s lien.

After more than three years of litigation, including an appeal, it was ultimately determined that the homeowners had to pay all but $500 of the contractor’s unpaid $5400 bill and that the contractor was entitled to foreclosure of its mechanic’s lien.

This lawsuit is now in the last stage of its life cycle. The present dispute relates to the contractor’s attorney fees, which now amount to over $58,000. Iowa law provides that "[i]n a court action to enforce a mechanic’s lien, a prevailing plaintiff may be awarded reasonable attorney fees." Iowa Code § 572.32(1) (2013). But Iowa law also provides significant homestead rights. See id. ch. 561.

In March 2017, a revised decree was entered granting the contractor the right to foreclose a mechanic’s lien against the property both for the principal amount due ($4900) and for the attorney fees ($58,000). Five months later, when a second sheriff’s sale of the home was imminent, the homeowners for the first time asserted that including attorney fees in the mechanic’s lien foreclosure decree violated their homestead rights. They maintained that the house was their homestead and could not be sold to pay the contractor’s attorney fees—or anything other than the $4900 principal amount due. That dispute forms the basis for the present appeal.

On our review, we conclude that in principle the homeowners are right: homestead rights generally prevail over a mechanic’s lien for attorney fees. Neither the homestead law nor the mechanic’s lien statute contain specific language to the contrary and in that event the homestead law must go first. See Iowa Code § 561.16. However, we also conclude that the homeowners’ assertion of homestead rights in this case came too late. The homeowners needed to raise their homestead exemption before the district court entered a foreclosure decree recognizing that the contractor had a mechanic’s lien for both the unpaid principal amount and attorney fees "senior and superior to any right, title or interest owned or claimed by" the homeowners—not later when the decree was being executed.

Accordingly, we affirm the district court judgment that found a waiver by the homeowners. We also affirm in part and vacate in part the decision of the court of appeals.

II. Facts and Procedural Background.

A. The Waterproofing Contract between the Joneses and Standard Water. In June 2013, Michael and Cori Jones (the Joneses) hired Standard Water Control Systems (Standard Water) to install a waterproofing system in the basement of their two-bedroom, one-story home located in Des Moines.¹ The parties’ written contract called for installation of drainage pipe and tile and a sump pump, and removal and replacement of the existing concrete. The contract price was $6000, of which the Joneses paid $600 down.

The contract provided that Standard Water would "not be responsible for any damage to hidden or unknown installations under the floor." It also provided that "any person or company supplying labor or materials for this improvement to your property may file a lien against your property if that person or company is not paid for the contributions." Lastly, it stated that

if any type of collection action is brought against the Owner to collect any portion of Contractor’s fee, the Owner shall be liable for the Contractor’s actual attorney’s fees and costs of collection, in addition to any balance due under this Agreement.

B. The Beginning of the Parties’ Dispute. During the course of this work on July 15, one of Standard Water’s employees drilled through the home’s water and sewer lines. These lines were unexpectedly buried within the concrete basement floor. Standard Water informed the Joneses a plumber would need to repair the breaks before they could complete their work. Standard Water had finished ninety-five percent of the job at that point. It left behind materials to complete the remaining five percent of the work once the repair was made. Standard Water also left behind an invoice for the $5400 due on completion of the work. The invoice stated that interest of twelve percent per annum would be charged on past-due balances. Standard Water promised to return to the house and complete the waterproofing system once the Joneses repaired the water and sewer lines.

The Joneses did not have the water and sewer lines repaired for approximately two months, did not allow Standard Water to complete the waterproofing work, and did not pay Standard Water’s $5400 bill. Standard Water posted a mechanic’s lien to the lien registry on July 31. On September 10, the Joneses had a plumber repair the water and sewer lines and perform other plumbing work to make the house code-compliant. On October 1, the Joneses’ counsel made demand on Standard Water to foreclose its mechanic’s lien pursuant to Iowa Code section 572.28. On October 30, Standard Water filed a petition to foreclose the lien in the Polk County District Court.

C. The First Round of District Court Litigation. Thus began the long and winding procedural history of this litigation. A trial to the district court was held on August 18 and 19, 2014. At the conclusion, the court found that Standard Water had substantially completed the waterproofing job on July 15, 2013, that the presence of the water and sewer lines encased in the concrete basement floor was unusual and not foreseeable, and that Standard Water had exercised due care in performing its work. The court concluded Standard Water was entitled to judgment for $5400 plus interest at twelve percent from July 15, assuming it was allowed by the Joneses to complete the work. If not, the judgment amount would be reduced by $500 from $5400 to $4900. In a supplemental order, the court awarded $43,835.25 in attorney fees, pursuant to Iowa Code section 572.32 and the parties’ contract, and $299.04 in costs. Final judgment was entered on February 16, 2015, in person against the Joneses and in rem against the Joneses’ home. The in rem portion of the judgment stated,

Standard is entitled to foreclosure of its mechanic’s lien dated July 31, 2013 ... on the single family dwelling owned by the Joneses with a ... locally known address of 2910 Mahaska Ave., Des Moines, Polk County, Iowa 50317 ("Property"); ... Standard is entitled to an in rem judgment and a foreclosure of the Mechanics’ Lien in the full and total amount of the aforementioned monetary judgment, together with all accruing interest, costs and fees; and ... the Mechanic’s Lien is a valid lien and is the senior lien against the Property, being senior and superior to any right, title or interest owned or claimed by any of the Defendants.

D. The First Appeal. The Joneses appealed.² They argued that Standard Water had failed to post a notice of commencement of work to the lien registry within ten days of the commencement of work as required by Iowa Code section 572.13A. They also argued that the contract provision authorizing an award of attorney fees to Standard Water was not enforceable. Lastly, they urged that the amount of attorney fees was excessive. The case was transferred to the court of appeals, which on August 31, 2016, upheld the judgment except for the amount of fees. Standard Water Control Sys., Inc. v. Jones , 888 N.W.2d 673, 679 (Iowa Ct. App. 2016). The court noted that the fees "exceeded 800% of the underlying judgment" and that the district court had "underemphasized the time necessarily spent on this matter given the limited amount at issue and the limited factual issue presented." Id. The court affirmed the judgment in part and remanded "for additional fact-finding to determine an [attorney fee] award consistent with the facts presented in this case and the Schaffer [v. Frank Moyer Construction, Inc. , 628 N.W.2d 11, 24 (Iowa 2001) ] factors." Id. We denied the Joneses’ application for further review.

E. The First Sheriff’s Sale—and the Setting Aside of that Sale. In the meantime, Standard Water had arranged for a special execution on its judgment and had caused the home to be sold at a sheriff’s sale on October 21, 2015. At the sale, Standard Water was the winning bidder for $45,000.

Following the court of appeals decision, the Joneses moved immediately to set aside the sheriff’s sale. On September 28, 2016, while the Joneses’ application for further review in our court was still pending and procedendo had not yet issued, the district court set aside the sale. The district court noted that Standard Water "will not be prejudiced" because it "still retain[s] a judgment against the property."

F. The Second Round of District Court Litigation. On March 24, 2017, the district court entered an order reducing Standard Water’s district court attorney fees by $2165, but awarding an additional $17,283.44 for appellate attorney fees.³ Hence, the revised judgment amounted to $41,670.25 in trial attorney fees and $17,283.44 in appellate attorney fees against the Joneses. The...