Wells Fargo Equip. Fin., Inc. v. Retterath

• Decision Date: 12 April 2019
• Docket Number: No. 18-0599,18-0599
• Citation: 928 N.W.2d 1
• Parties: WELLS FARGO EQUIPMENT FINANCE, INC., Appellee, v. Jason RETTERATH and Analia Retterath, Appellants.
• Court: Iowa Supreme Court

928 N.W.2d 1

WELLS FARGO EQUIPMENT FINANCE, INC., Appellee,

v.Jason RETTERATH and Analia Retterath, Appellants.

No. 18-0599

Supreme Court of Iowa.

Filed April 12, 2019

Rehearing Denied June 17, 2019

Jason W. Miller of Patterson Law Firm, L.L.P., Des Moines, for appellants.

G. Mark Rice and Johannes H. Moorlach of Whitfield & Eddy, P.L.C., Des Moines, for appellee.

CHRISTENSEN, Justice.

A judgment creditor filed foreign judgments and obtained a charging order to execute these foreign judgments in Iowa district court against the judgment debtor’s membership interests in an Iowa limited liability company (LLC). The judgment debtor and his wife filed a petition to vacate the charging order based on their claim that the creditor could not attach these interests since the debtor and his wife owned them as a tenancy by the entireties in their domicile of Florida. The creditor filed a motion for summary judgment, maintaining Iowa law governs and the legal doctrine of tenancy by the entireties does not exempt the debtor’s membership interest in the Iowa LLC since Iowa does not recognize tenancy by the entireties. The district court granted the creditor’s motion for summary judgment and dismissed the couple’s petition to vacate the charging order.

On appeal, the couple presents multiple claims. First, they argue the district court erred by applying Iowa law instead of Florida law. Second, they contend the district court erred in determining the couple did not own their membership units in a tenancy by the entireties. Third, the couple claims the foreign judgments were not properly registered, nor was the charging order properly issued. Finally, they challenge the district court’s ruling that there were no due process grounds to vacate the charging order. For the reasons set forth below, we affirm the district court judgment.

I. Background Facts and Proceedings.

Jason and Analia Retterath are Florida citizens and residents of Palm Beach County, Florida, who have been married since February 13, 1999. Wells Fargo Equipment Finance, Inc. (WFEFI) is a Minnesota corporation with its principal office in Minneapolis, Minnesota, that is the owner and holder of two Florida judgments against Jason arising from its suit against Jason in Broward County, Florida. The litigation that led to these judgments began in November 2009, and the judgments were entered on August 22, 2011, and January 23, 2012.

On December 22, 2015, WFEFI caused these judgments to be filed in the Iowa District Court for Chickasaw County alongside an affidavit in support of foreign judgment, listing Jason’s name and last known address. The clerk of court did not make a note of the mailing notice of the filing of WFEFI’s foreign judgments to Jason in the docket. On January 6, 2016, WFEFI filed its application for charging order pursuant to Iowa Code section 489.503 in Iowa district court. WFEFI sought to execute the Florida judgments against Jason’s membership interest in Homeland Energy Solutions, LLC, (Homeland), an Iowa limited liability company that has its home offices in Lawler, Iowa. Counsel for WFEFI certified the application, which was mailed to Jason in conjunction with its filing. Jason stated in an affidavit that he did not "receive service of process or otherwise receive notice of the proceedings that resulted in the Charging Order."

Homeland owns and operates ethanol production and by-product production facilities, and it also markets and processes ethanol and related by-products. Though it is located in Iowa, Homeland began selling membership units in the state of Florida in 2006. Its affairs are governed by its operating agreement, which is entered into between Homeland and "each of the Persons identified as Members on the Company’s Unit holder Register and any other Persons that may from time-to-time be admitted as Members of the Company in accordance with the terms" of the agreement. According to the agreement, "[t]he laws of the State of Iowa shall govern the validity of this Agreement, the construction of its terms, and the interpretation of the rights and duties arising thereunder."

Jason acquired his membership interest in Homeland in his individual capacity on October 29, 2007, when he purchased 2000 units at a price of $1000 per unit. He acquired an additional 250 units in his individual capacity by means of a corporate transfer of assets agreement on May 14, 2010, which was after WFEFI commenced its Florida action against Jason. On December 15, 2010, Jason transferred all of his individual membership units in Homeland to himself and Analia through a unit transfer application. The transfer application required Jason to choose one of the following forms of ownership: individual, joint tenants with right of survivorship, corporation on partnership, trust, or other. Jason marked the "Joint Tenants with Right of Survivorship" box to indicate the form of ownership. The Retteraths file tax returns in Iowa to, among other things, report the income they receive from Homeland. Prior to the charging order, Homeland made distribution payments directly to the Retteraths’ personal joint banking account in Florida.

On January 8, 2016, WFEFI filed an affidavit regarding the amounts due on the Florida judgments, which was served on Jason. Shortly thereafter, the district court entered a charging order on January 12, which stated,

IT IS, THEREFORE, ORDERED that WFEFI is hereby granted a charging order against the entire membership interest of [Jason] Retterath in Homeland pursuant to Iowa Code section 489.503. Any amount to be distributed to [Jason] Retterath up to and including the amount to fully satisfy WFEFI shall be remitted payable to Wells Fargo Equipment Finance, Inc.... Any amount so received by WFEFI shall be satisfied, and WFEFI shall submit a partial or full satisfaction as appropriate to indicate the status of the Charging Order. In the event of full satisfaction, any surplus shall be paid to Retterath.

The charging order was served on Jason through the mail to his correct address.

On July 13, Jason and Analia Retterath filed a petition to vacate the charging order, claiming they took possession of the Homeland membership units simultaneously as tenants by the entireties under Florida law. The Retteraths maintained Florida law governs their ownership of the Homeland units and Florida law prohibits making property owned as a tenancy by the entireties available to answer for the judgment debts of one of the tenants individually. The petition noted Analia was never served with process or otherwise provided notice of the application for charging and claimed this lack of notice violated Analia’s due process rights under the Federal and Iowa Constitutions. The Retteraths also claimed the statutory scheme of Iowa Code chapter 626A violates their right to procedural due process.

WFEFI filed its answer to the petition to vacate on August 5, asserting Iowa law governs the parties’ dispute and the legal doctrine of tenancy by the entireties does not exempt Jason’s membership interest in Homeland from the judgment. Thus, WFEFI argued as an affirmative defense that the Retteraths failed to state a claim for which relief may be granted. WFEFI and the Retteraths filed motions for summary judgment on March 3, 2017, and the parties filed a resistance to the opposing party’s respective motion for summary judgment on March 24.

On February 8, 2018, the district court granted WFEFI’s motion for summary judgment and denied the Retteraths’ motion for summary judgment. The district court also dismissed the Retteraths’ petition to vacate the charging order. Though the district court found it was unnecessary to determine whether Florida or Iowa law applied, it still addressed the issue and determined Iowa law applied since "Iowa has the most significant contacts with this dispute." Nevertheless, the district court concluded a tenancy by the entireties did not exist even if Florida law applied since they did not receive title from the same conveyance. The district court explained Jason received his membership interest from Homeland, while Analia later received her membership interest from Jason. Finally, the district court addressed WFEFI’s claim from its supplemental brief, which accused Jason of fraudulent conversion for transferring his Homeland membership units to avoid creditors to the underlying lawsuit. The district court concluded additional findings of fact were required and denied summary judgment on the fraudulent conversion issue.

On February 23, the Retteraths filed a motion to enlarge and modify pursuant to Iowa Rule of Civil Procedure 1.904(2), requesting the district court rule upon their claims that the charging order is void because it was issued without jurisdiction over the Retteraths, the statutory scheme of Iowa Code chapter 626A violates their right to procedural due process, and the charging order violated Analia’s right to due process. The district court entered an addendum to its ruling on the motions for summary judgment on March 7. The district court denied the Retteraths’ request to set aside the charging order on due process grounds because Analia was not entitled to notice since she was not a judgment debtor of WFEFI and the order did not direct any collection against her interest. The Retteraths filed their notice of appeal on April 2. We subsequently granted and retained the appeal.

II. Standard of Review.

We review the district court’s ruling on a motion to vacate for the "correction of errors at law, not de novo." State ex rel. Goettsch v. Diacide Distribs., Inc. , 596 N.W.2d 532, 537 (Iowa 1999). The district court’s factual "findings are binding on us if there is substantial evidence to support them." In re Tr. of Killian , 494 N.W.2d 672, 675 (Iowa 1993) (quoting Mishler v. Stouwie , 301 N.W.2d 744, 747 (Iowa 1981) ). We also "review a district court ruling on a motion for summary judgment for correction of errors at law."

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