Standard Water Control Systems, Inc. v. Michael D. Jones and Cori Jones ( 2020 )

THE SUPREME COURT OF IOWA
No. 17–2009
Filed February 7, 2020
STANDARD WATER CONTROL SYSTEMS, INC.,
Appellee,
vs.
MICHAEL D. JONES and CORI JONES,
Appellants.
---------------------------------
MICHAEL D. JONES and CORI JONES,
Counterclaim Plaintiffs,
vs.
STANDARD WATER CONTROL SYSTEMS, INC.,
Counterclaim Defendant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Lawrence P.
McLellan, Judge.
Homeowners appeal a district court order allowing a contractor to
recover attorney fees against a homestead in an action to enforce a
mechanic’s lien. DECISION OF COURT OF APPEALS AFFIRMED IN
PART AND VACATED IN PART; DISTRICT COURT JUDGMENT
AFFIRMED.
2
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.
3
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
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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.
1Michael Jones had inherited the house. The Joneses did not move into the house
until months after Standard Water did the waterproofing work.
5
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
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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.
7
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.
2The Joneses also elected not to permit Standard Water to complete the project,
leading to a $500 reduction in the principal amount of the judgment.
8
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
3Standard Water had requested $29,144 for the appeal. In justifying the overall
fee award, the district court explained,
[W]hile this [s]hould have been a “run-of-the-mill” mechanic’s lien
foreclosure, the Jones escalated the stakes and caused much of the
expended legal services by the positions they took in the case. They
asserted that Standard failed to properly perform when they struck and
cut the water line in their home. The court disagreed. They argued that
Standard breached its duty by not discovering the water line before it was
cut. The Jones’ plumber testified that no plumber would anticipate the
water line to be located where it was in the Jones’ house. The Jones
demanded and sought over $11,000.00 in damages against Standard and
they received nothing on this claim. The case because of the positions
asserted by the Jones and the legal interpretation required of the amended
mechanic’s lien statute caused this case to be anything but a “run-of-the-
mill” foreclosure of a mechanic’s lien.
....
The court recognizes the attorney fees awarded for services
provided through trial are substantially greater than the monetary award
Standard received. However, the Jones forced this litigation when they
demanded Standard foreclose on the mechanic’s lien. They escalated the
stakes in the case when they asserted a counterclaim against Standard for
an amount twice the amount sought by Standard. They interpreted and
argued that certain sections of the Iowa Code that if they prevailed, would
have precluded Standard’s recovery here. They filed a motion for partial
summary judgment in an attempt to convince the district court their
interpretation of the Iowa Code was correct.
Standard was forced to respond. The response provided was
reasonable and necessary, as limited by this order. Standard presented
the appropriate lay and expert witnesses to prove their case and rebut the
Jones. They, likewise, responded appropriately and reasonably to issues
set forth in the pre-trial motions filed by the Jones.
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attorney fees against the Joneses. The court also reduced the Joneses’
redemption period on a future sale from one year to ninety days.
The Joneses filed a motion to enlarge and amend the judgment and
a motion to reopen the record. The court denied these motions on May 9.
The Joneses launched their second appeal, contending the new total of
$58,953.69 in fees was excessive.
G. The Second Sheriff’s Sale and the Joneses’ Assertion of the
Homestead Exemption. Standard Water began the sheriff sale process
anew while the Joneses’ second appeal went forward. A sheriff’s sale was
again scheduled—this time for August 22, 2017. On August 10, less than
two weeks before the sale date, the Joneses filed a motion to vacate the
writ of special execution, asserting for the first time that the house was
their homestead and could not be sold to pay attorney fees, interest, or
costs, but only the principal amount of the judgment itself. The Joneses
argued the sale should not go forward, but if it did, they should be able to
redeem their home for $4900—i.e., the principal amount.
On August 21, the court denied the motion to vacate the special
execution and allowed the sale to go forward. In its order, the court
reserved a later determination as to whether the house was the Joneses’
homestead and—if so—whether the lien amount could include attorney
fees, costs, and interest.
Standard Water again purchased the home at the August 22, 2017
sale for $45,000. In a November 12 postsale order, the district court
addressed the issues it had reserved. By then, the parties had agreed that
the house was in fact the Joneses’ homestead, so the court turned to the
other issues. 4 The court held that “[Iowa Code] section 561.21(3) does not
4The homestead declaration and plat were recorded August 21, 2017, the day
before the second sheriff’s sale. In addition, the Joneses filed affidavits dated August 22
10
allow a homestead to be sold to recover attorney fees, costs of the action
or interest that may have been entered as a judgment against the home in
[a] foreclosure action under chapter 572.” However, the court observed
that the Joneses did not raise their homestead claim until 2017. The court
also observed that the Joneses had successfully moved to set aside the
first sheriff’s sale based on the premise that attorney fees were part of the
lien. Accordingly, for reasons of judicial estoppel, law of the case, and res
judicata, the court declined to set aside the August 22 sale. On November
17, the Joneses redeemed the house by tendering $45,300 to the Polk
County district court clerk.
The Joneses appealed a third time, arguing the district court erred
in finding they were barred by estoppel, waiver, and res judicata from
asserting their homestead rights against the lien for attorney fees, costs,
and interest.
H. The Second Appeal. Simultaneously, the Joneses’ second
appeal, which challenged the revised amount of attorney fees awarded,
was still proceeding. We transferred that appeal to the court of appeals.
On February 7, 2018, the court of appeals rejected the Joneses’ contention
that the fees were excessive, upholding the total award of $58,953.69 but
declining to award any attorney fees for that appeal. Standard Water
Control Sys., Inc. v. Jones, No. 17–0854, 2018 WL 739330, at *3 (Iowa Ct.
App. Feb. 7, 2018).
I. The Present Appeal. The Joneses’ third appeal was also
transferred to the court of appeals. On February 9, 2019, that court
upheld the district court’s ruling that the “[Iowa Code] does not allow a
stating that the property was their homestead. The record does not show exactly when
the property became the Joneses’ homestead, although it suggests they moved into the
house in 2014.
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homestead to be sold to recover attorney fees, costs of the action or interest
that may have been entered as a judgment against the home in a
foreclosure action under chapter 572.” But it overturned the district
court’s ruling that principles of judicial estoppel, waiver, and res judicata
barred the present consideration of the Joneses’ homestead arguments.
Standard Water Control Sys., Inc. v. Jones, No. 17–2009, 2019 WL 478498,
at *7 (Iowa Ct. App. Feb. 6, 2019).
Standard Water applied for, and we granted, further review.
III. Standard of Review.
We review questions of statutory interpretation for correction of
errors at law. Vance v. Iowa Dist. Ct., 907 N.W.2d 473, 476 (Iowa 2018).
We review questions of res judicata for corrections of errors at law. Tyson
Foods, 740 N.W.2d at 195.
IV. Analysis.
A. Can Attorney Fees, Costs and Interest Be Recovered in a
Mechanic’s Lien Foreclosure Action Against the Homestead? This
case involves the intersection of two chapters in the Iowa Code—chapter
561 concerning homesteads and chapter 572 concerning mechanic’s liens.
Iowa Code section 561.16 provides that “[t]he homestead of every person
is exempt from judicial sale where there is no special declaration of statute
to the contrary.” Iowa Code § 561.16. Section 561.21 provides,
The homestead may be sold to satisfy debts of each of
the following classes:
....
3. Those incurred for work done or material furnished
exclusively for the improvement of the homestead.
Id. § 561.21(3). Meanwhile, Iowa Code section 572.32 provides, “In a court
action to enforce a mechanic’s lien, a prevailing plaintiff may be awarded
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reasonable attorney fees.” Id. § 572.32(1). No one disputes at this point
that Standard Water can recover its principal amount due of $4900 by
foreclosing on the Joneses’ homestead. This represents “work done or
material furnished exclusively for the improvement of the homestead.” Id.
§ 561.21(3). The question is whether Standard Water can also recover its
attorney fees, interest, and costs by foreclosing on the homestead.
Iowa has a long history of protecting the homestead. In 1854, we
considered Bridgman v. Wilcut, 4 Greene 563 (Iowa 1854), our first case
involving Iowa’s homestead statute. In that case, we found a debtor was
entitled to protect his home from sale under an 1849 statute protecting
homesteads from “forced sale.” Id. at 566. Thus, less than three years
after Iowa became a state, our legislature had already passed a statute
protecting the homestead.
By 1928, we observed that “exemption statutes are to be construed
liberally in favor of the debtor.” Berner v. Dellinger, 206 Iowa 1382, 1385,
222 N.W. 370, 372 (1928). In 1934, we considered whether a homeowner
who wanted to redeem her home that had been foreclosed in a mechanic’s
lien action could be required to pay the lienor’s $250 in attorney fees. See
Werner v. Hammill, 219 Iowa 314, 316, 257 N.W. 792, 793 (1934). We held
that the homeowner could not be required to pay the fees. Id. at 317–18,
257 N.W. at 794. Although there was no statute in effect comparable to
Iowa Code section 572.32 at the time, and, in fact, no one furnished a
reason why the homeowner should have to pay the lienor’s fees, id. at 316,
257 N.W. at 793–94, this case does form part of our historical backdrop.
In 2014, we reaffirmed that “we construe our homestead statute
broadly and liberally to favor homestead owners” because the legislative
scheme strongly favors the homestead. In re Estate of Waterman, 847
N.W.2d 560, 567 (Iowa 2014) (“The general assembly has ‘chosen to
13
provide special procedures to protect homestead rights, and has defined
this protection in a comprehensive manner.’ ” (quoting Martin v. Martin,
720 N.W.2d 732, 738 (Iowa 2006)). Moreover, the homestead statute exists
“to provide a margin of safety to the family, not only for the benefit of the
family, but for the public welfare and social benefit which accrues to the
State by having families secure in their homes.” Id. at 566–67 (quoting
Brown v. Vonnahme, 343 N.W.2d 445, 451 (Iowa 1984)); see also Am. Sav.
Bank of Marengo v. Willenbrock, 209 Iowa 250, 253, 228 N.W. 295, 297
(1929) (“The law allowing the exemption is to be liberally construed, and
is not to be pared away by construction, so as to defeat its beneficent,
sociological, and economic purpose.”).
However, the mechanic’s lien also has an important and
longstanding status in Iowa. The territory of Iowa already had a
mechanic’s lien law by 1843, and some form of the lien has existed ever
since. Colcord v. Funk, Morris 178, 179, 1843 WL 1195, at *1 (Iowa 1843)
(per curiam); see also Schaffer, 628 N.W.2d at 19; Greene & Bros. v. Ely,
2 Greene 508, 508 (Iowa 1850). In Schaffer, we noted the mechanic’s lien
statute stems “from principles of equity which require paying for work
done or materials delivered.” 628 N.W.2d at 19 (quoting Carson v.
Roediger, 513 N.W.2d 713, 715 (Iowa 1994)). Considerations of
“restitution and prevention of unjust enrichment drive the mechanic’s lien
entitlement.” Id. (quoting Carson, 513 N.W.2d at 715). Therefore, we
liberally construe the mechanic’s lien statute. Id.; see also Winger
Contracting Co. v. Cargill, Inc., 926 N.W.2d 526, 535 (Iowa 2019) (“The
mechanic’s lien statute is liberally construed to promote restitution,
prevent unjust enrichment, and assist the parties in obtaining justice.”).
Additionally, in 1983, the legislature amended the mechanic’s lien
statute to allow for the recovery of attorney fees in mechanic’s lien actions.
14
1983 Iowa Acts ch. 106, § 1 (codified as amended at Iowa Code § 572.32
(2020)). “Typically, courts generously construe statutes authorizing an
award of fees to a prevailing party.” Lee v. State, 874 N.W.2d 631, 645
(Iowa 2016).
Although we have not previously addressed the interplay between
the homestead law and Iowa Code section 572.32, we have had to resolve
other tensions between the homestead law and separate provisions of the
Iowa Code. Thus, in In re Property Seized from Bly, we were presented with
the question “whether a legitimately acquired homestead may be forfeited
to the State under Iowa Code chapter 809 . . . when it has been used by
its owner to facilitate the commission of a criminal offense.” 456 N.W.2d
195, 196 (Iowa 1990). The forfeiture statute expressly provided that
property used to facilitate the commission of a criminal offense was
forfeitable. Id. Yet we noted that Iowa Code section 561.16 required a
“special declaration,” and “neither the homestead exemption nor chapter
561 is mentioned anywhere in [the statutory definition of forfeitable
property or the chapter of the Iowa Code devoted to forfeiture].” Id. at 200.
In summary, we said,
In light of the legislature’s choice not to refer to the
homestead law in chapter 809, we conclude that the current
Iowa statutes do not permit the State to forfeit a legitimately
acquired homestead under section 809.1(2)(b) even though
the homestead was used by its owner to facilitate the
commission of a criminal offense.
Id.
Under the Bly standard for what amounts to a “special declaration,”
Iowa Code section 572.32 falls short. It too does not mention the
homestead exemption.
One possible counterargument to Bly is that a “special declaration”
is unnecessary here because the exception for debts “incurred for work
15
done or material furnished exclusively for the improvement of the
homestead” already includes attorney fees incurred enforcing those debts.
See Iowa Code § 561.21(3) (2013) (stating that the homestead may be sold
to satisfy debts “incurred for work done or material furnished exclusively
for the improvement of the homestead”). We are not persuaded by that
argument. The language in section 561.21(3) resembles the language at
the beginning of the mechanic’s lien chapter in section 572.2(1). See id.
§ 572.2 (stating that the lien is “to secure payment for the material for
labor furnished or labor performed”). Yet that language did not authorize
recovery of attorney fees until section 572.32 was added in 1983. Attorney
fees are not a debt incurred for work done or material furnished. They are
a debt incurred for collecting a debt for work done or material furnished. 5
Still, a number of Iowa cases have found that specific statutory
provisions trump the homestead exemption even when they do not
mention it. An example can be found in tax law. See Tate v. Madison
County, 163 Iowa 170, 171, 143 N.W. 492, 492 (1913). Tate concerned a
statute declaring “taxes due from any person upon personal property shall
be a lien upon any and all real estate owned by such person.” Id. (quoting
Iowa Code § 1400 (Supp. 1907)). Our court found “any and all real estate”
included homesteads, making taxes enforceable against them, including
taxes not specifically due on the homestead. Id. at 172, 143 N.W. at 492.
We reaffirmed that conclusion in Hampe v. Philipp, 210 Iowa 1243, 1244,
232 N.W. 648, 649 (1930). 6
5See also Palomita, Inc. v. Medley, 747 S.W.2d 575, 577–78 (Tex. App. 1988)
(holding that a Texas law authorizing recovery of attorney fees by a mechanic’s lienholder
who recovers in a suit on the lien does not permit the fees to be included in the lien,
because the lien “secures payment for . . . the labor done or material furnished for the
construction or repair” under Texas law (quoting Tex. Prop. Code Ann. § 53.023)).
6The relevant statute now reads, “[E]xcept that no property of the taxpayer is
exempt from payment of the tax.” Iowa Code § 422.26(7)(a) (2020).
16
Even without the benefit of “any and all real estate” language, we
held in Cox v. Waudby that a married couple could not shield a home they
had purchased with fraudulently obtained proceeds from an equitable lien.
433 N.W.2d 716, 718–19 (Iowa 1988). We explained,
Although exemption statutes are to be liberally construed in
favor of the debtor, our construction must not extend the
debtor privileges not intended by the legislature. We conclude
the legislature never contemplated or intended that a
homestead interest could be created or maintained with
wrongfully appropriated property. Where wrongfully obtained
funds are used to purchase property, the property does not
belong to the purchasers, and therefore, to the extent of the
illegal funds used, they never acquire a homestead interest.
Id. at 719 (citations omitted).
And in In re Marriage of Tierney, we held that Iowa Code section
561.16 did not bar a dissolution decree from directing that the family
homestead be sold, even though nothing in Iowa Code section 598.21
expressly mentioned homestead. 263 N.W.2d 533, 534–35 (Iowa 1978).
We observed, “Our cases have long recognized that § 598.21 constitutes a
‘special declaration of statute’ which makes homestead laws ineffective to
bar judicial sale of the homestead in adjusting the property rights of the
parties.” Id. at 534.
Additionally, a homestead may be subjected to an involuntary
partition sale despite the absence of any reference to homestead in the
partition statutes or rules. See Coyle v. Kujaczynski, 759 N.W.2d 637, 641
(Iowa Ct. App. 2008). As the court of appeals explained in Coyle,
[T]he legislature, in providing for homestead protection, never
contemplated or intended that a homestead interest could be
created or maintained against other co-owners of the property.
Rather, the legislature merely sought to put homesteads
beyond the reach of creditors.
Id.
17
We think Bly controls as to whether attorney fees can be recovered
against the homestead in an action to foreclose a mechanic’s lien. Iowa
Code section 572.32, like the criminal forfeiture law in Bly and unlike the
laws governing divorce, partition, and taxes in Tierney, Coyle, and Tate, is
a relatively recent progeny of the legislative process. The legislature did
not elect to make a “special declaration” regarding the unavailability of the
homestead exemption in 1983 when it enacted section 572.32.
Accordingly, we conclude the homestead exemption prohibits efforts to
recover attorney fees in mechanic’s lien foreclosure actions. We do not
believe we are extending to the debtors in this case a privilege “never
contemplated or intended” by the legislature. Cox, 433 N.W.2d at 719.
When the legislature wants to create a new remedy intended to supersede
the homestead exemption, section 561.16 puts the burden on the
legislature to make a “special declaration” saying so.
Our conclusion also finds support in Iowa Code section 4.7, which
states,
If a general provision conflicts with a special or local provision,
they shall be construed, if possible, so that effect is given to
both. If the conflict between the provisions is irreconcilable,
the special or local provision prevails as an exception to the
general provision.
Iowa Code § 4.7 (2020). If we line up Iowa Code sections 561.16 and
561.21, on the one hand, and Iowa Code section 572.32, on the other, the
latter mentions only a remedy. The homestead provisions, however,
mention both an exemption and remedies to which the exemption does not
apply. Hence, the relevant homestead provisions appear to be more
specific.
We note that Texas law, like Iowa law, expressly authorizes the
recovery of attorney fees in a mechanic’s lien foreclosure action. See Tex.
18
Prop. Code Ann. § 53.156 (West, Westlaw through 2019 Legis. Sess.). Yet
a Texas appellate court held that attorney fees could not be paid from
homestead sale proceeds. See Dossman v. Nat’l Loan Investors, L.P., 845
S.W.2d 384, 386–87 (Tex. App. 1992).
There are reasonable policy reasons to reach this result. When a
dispute arises between a homeowner and a residential contractor, it is
conceivable that the contractor’s attorney fees could far exceed the
underlying amount in dispute. That is exactly what happened here. In
that circumstance, the legislature may not have wanted to put the home
in jeopardy for such amounts. On the other hand, given that construction
litigation can be costly and protracted, the legislature may have decided
that for nonhomesteads the contractor should be compensated for its
actual litigation cost when the owner is in the wrong—especially when
attorney fees are less likely to be disproportionate to the amount in
controversy.
Yet the matter is not without doubt. A 1919 precedent, not cited by
either party, supports Standard Water’s position. See Chandler v. Hopson,
188 Iowa 281, 175 N.W. 62 (1919). In Chandler, we upheld a judgment
for the defendant in a proceeding to fix the boundary line between two
properties. Id. at 288–89, 175 N.W. at 64. We also held that the district
court did not err in making the costs a lien on the plaintiff’s property, even
though it was his homestead. Id. at 289, 175 N.W. at 64–65. We noted
that Iowa Code section 4238, now section 650.16, provided,
The costs in the proceeding shall be taxed as the court shall
think just, and shall be a lien on the land or interest therein
owned by the party or parties against whom they are taxed,
so far as such land is involved in the proceedings.
Id. at 289, 175 N.W. at 65 (quoting Iowa Code § 4238 (1897) (current
version available at Iowa Code § 650.16 (2020))). However, we then quoted
19
from Iowa Code section 2972, which is now section 561.16. Id. We
concluded,
This section [section 2972, now section 561.16] was
enacted prior to section 4238 [now section 650.16]. It will be
noted that by section 2972 the homestead is exempt from
judicial sale only “when there is no special declaration of
statute to the contrary.” Section 4238 expressly makes any
judgment for costs a lien upon the land involved in the
proceedings.
We are of opinion that the decree of the district court is
right.
Id. (quoting Iowa Code § 2972 (1897) (current version available at Iowa
Code § 561.16 (2020))). In short, even though section 4238 did not
mention homestead rights, the express authority granted in that area of
the Iowa Code to make the costs a lien on the land was deemed a “special
declaration” sufficient to overcome the homestead. Bly seems to be to the
contrary and requires the legislature “to refer to the homestead law.” 456
N.W.2d at 200.
In any event, as to interest and taxable costs here, we hold that they
can be included in a mechanic’s lien against a homestead. Unlike attorney
fees, interest and costs have traditionally been recoverable in mechanic’s
lien actions and in litigation generally. We believe that interest is part of
the “debt[] . . . incurred for work done or material furnished exclusively for
the improvement of the homestead.” Iowa Code § 561.21(3) (2013).
Limiting an unpaid contractor to recovery of its principal amount from the
homestead no matter how long it took to foreclose the lien would encourage
delay on the part of the homeowner and was “never contemplated or
intended” by the legislature. Cox, 433 N.W.2d at 719.
Our prior cases have allowed interest and costs in mechanic’s lien
judgments. See Farrington v. Freeman, 251 Iowa 18, 24–25, 99 N.W.2d
388, 391–92 (1959); Moffitt v. Denniston & Partridge Co., 229 Iowa 570,
20
571–72, 576, 294 N.W. 731, 731, 734 (1940). In Moffitt, we affirmed a
mechanic’s lien judgment including interest and costs and allowed it to be
enforced against a homestead on the basis of the predecessor to section
561.21(3). 229 Iowa at 571–72, 576, 294 N.W.2d at 731, 734. In fairness,
whether interest and costs could be included in the judgment was not
presented as a distinct issue in Moffitt. Id. at 571–76, 294 N.W. at 731–
34. In Farrington, we held that a contractor was entitled to interest in an
action for foreclosure of a mechanic’s lien. 251 Iowa at 23–26, 99 N.W.2d
at 391–93. Whether the property was a homestead was not discussed,
although the defendants had occupied it as their home. Id. at 22–23, 99
N.W.2d at 389. See also S. Hanson Lumber Co. v. DeMoss, 253 Iowa 204,
212, 111 N.W.2d 681, 687 (1961) (awarding interest in an action to
foreclose a mechanic’s lien against a residence). These precedents are not
controlling, but they suggest we have previously operated on an
assumption that interest and costs can be recovered in an action to enforce
a mechanic’s lien, even against a homestead.
B. Are the Joneses Precluded by Judicial Estoppel, Law of the
Case, or Res Judicata/Waiver from Asserting Their Homestead
Exemption? Notwithstanding its views on the underlying legal issue, the
district court found it was too late for the Joneses to object to the inclusion
of attorney fees, costs, and interest in the sheriff’s sale. The court cited
three reasons—judicial estoppel, law of the case, and res judicata/waiver.
Significantly, this mechanic’s lien foreclosure action was filed in June
2013, but the homestead exemption was not raised until more than four
years later in August 2017. The Joneses argue that timing is not
dispositive, and the district court erred in invoking these three doctrines.
Because we find the issue of res judicata/waiver controlling, we do not
address the other two doctrines.
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The district court found principles of res judicata and waiver barred
the Joneses’ assertion of a homestead exemption. The court particularly
relied on Francksen v. Miller, 297 N.W.2d 375 (Iowa 1980). In that case, a
foreclosure action proceeded to judgment without the homeowner having
raised a homestead claim. Id. at 376. The homeowner appealed from that
judgment but dismissed his appeal. Id. He did not assert the homestead
defense until after the sheriff’s sale had taken place. Id. At that point, the
district court found the assertion untimely. Id. Later, the homeowner
again tried to raise the homestead as a defense in the purchaser’s forcible
entry and detainer (FED) action. Id. We held that the original foreclosure
decree was res judicata:
The record of the foreclosure suit shows defendant did
not assert his homestead claim until after the sheriff’s sale.
The trial court held the claim was untimely and refused to set
the sale aside. No appeal was taken from that adjudication.
Therefore, under Dodd [v. Scott, 81 Iowa 319, 46 N.W. 1057
(1890)], defendant is precluded from raising a homestead
defense in the present action, whether grounded on his own
right or derived from his wife’s right. This is based on the
principle of res judicata.
Id. at 377.
Although Francksen bears some similarities to the present case,
there are also differences. This case has never involved two separate legal
proceedings, such as the foreclosure action and the FED in Francksen.
Furthermore, when the Joneses raised their homestead right in August
2017 before the second sheriff’s sale, the foreclosure decree was still
winding through the appellate courts on the Joneses’ second appeal.
The pertinent question to ask is whether Francksen applies
whenever a homeowner fails to raise the homestead exemption before the
foreclosure decree eliminating the alleged homestead interest is entered.
In Larson v. Reynolds & Packard, we noted a failure to assert a homestead
22
right in a foreclosure action could preclude a party from later raising it.
13 Iowa 579, 582 (1862). There we reversed a decree of foreclosure and a
sheriff’s sale because the complainant’s wife had not been made a party to
the foreclosure proceeding. Id. Yet we added,
If complainant’s present wife had been made a party to
the bill to foreclose, we think the controversy would have been
at an end. A failure to set up the homestead exemption at
that time would have concluded and estopped them from
making the claim against one holding under the sale. The
order of foreclosure would have settled the homestead right,
and in an action for the possession, it could not be again
adjudicated.
Id.
Additionally, in Haynes, Hutt & Co. v. Meek, we precluded a
defendant from raising his homestead rights in an FED action after the
foreclosure suit terminated, observing “this homestead right, if it ever
existed, was lost to him by failing to set it up in the foreclosure proceeding.”
14 Iowa 320, 322 (1862).
In Dodd, which involved another FED action, we again reaffirmed,
“Being a party to the foreclosure suit, if he had a homestead right available
to him as a defense therein, he must interpose it, or the right is lost.” 81
Iowa at 320, 46 N.W. at 1058; see also In re Sinnard, 91 B.R. 850, 853
(Bankr. N.D. Iowa 1988) (citing Dodd and stating that “[a] debtor’s
homestead claim is a personal defense to a mortgage foreclosure action,
and is waived by the putative claimant’s failure to urge it in a foreclosure
action”). Ninety years later, we relied on Dodd in Francksen, 297 N.W.2d
at 377.
Also on point is Collins v. Chantland, 48 Iowa 241 (1878). The case
was a nineteeth-century precursor to a dramshop action:
Alice McNamara instituted an action against Peter Maloney
for injuries sustained by reason of sales of intoxicating liquors
to her husband; that Collins was made a party to the action,
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and a lien was claimed against his real estate occupied by
Maloney, where the liquors were sold.
Id. at 242. McNamara (the plaintiff) prevailed against Collins (the
homeowner). Id. Then Collins failed to assert his homestead rights until
a judgment enforcing the lien was entered and the property was set for
sale. Id. Although Collins filed a petition prior to the sale, we held this
was too late:
The plaintiff Collins was a party to the action wherein
judgment was rendered against his property. Any defense
which he had to the claim for a lien made against him should
have been made in that action. Failing to make such defense,
he cannot resist the enforcement of the judgment upon the
ground that the property is exempt from the lien. The
question of the lien is res adjudicata. His ignorance of his
rights at the time the judgment was rendered is no ground for
setting it aside.
Id. at 243.
Finally, in Weir & Russell Lumber Co. v. Kempf, the plaintiff obtained
favorable provisions in a decree of foreclosure on a mechanic’s lien. 234
Iowa 450, 451–53, 12 N.W.2d 857, 858–59 (1944). The defendant later
urged, among other things, that the decree violated her homestead rights.
Id. at 453–54, 12 N.W.2d at 859–60. We rejected this contention, stating,
“The collateral attack now made upon the decree . . . cannot be sustained.
The decree is not void and is not subject to collateral attack for mere errors
or irregularities.” Id. at 454, 12 N.W.2d at 860.
Based on these authorities, we hold that the March 24, 2017 order
modifying the prior February 16, 2015 order and granting a judgment in
rem against the home to Standard Water for $4900 plus $58,953.69 in
attorney fees has conclusive and binding effect. There is no question that
the Joneses could have raised their homestead exemption before the entry
24
of these orders. 7 In effect, their August 2017 motions challenging the
sheriff’s sale were a collateral attack on the previously entered foreclosure
decrees. For those motions to succeed, the previously entered orders had
to be wrong.
It is true that the Joneses appealed the March 24, 2017 order. But
the appeal raised only the excessiveness of the fees, and it was
unsuccessful.
This is a case where “[t]he order of foreclosure would have settled
the homestead right.” Larson, 13 Iowa at 582. The Joneses “cannot resist
the enforcement of the judgment upon the ground that the property is
exempt from the lien. The question of the lien is res adjudicata.” Collins,
48 Iowa at 243. “Being a party to the foreclosure suit, if [the Joneses] had
a homestead right available to [them] as a defense therein, [they] must
interpose it, or the right is lost.” Dodd, 81 Iowa at 320, 46 N.W. at 1058.
This outcome makes sense. Had the Joneses asserted their
homestead exemption earlier, much of this litigation could have been
avoided. The parties and the court system would have saved a great deal
of time and trouble.
Critical to our holding is the fact that the district court’s February
2015 and March 2017 decrees recognized that Standard Water’s attorney
fees were part of the mechanic’s lien on which Standard Water could
foreclose and were superior to any interest of the Joneses in the property.
This would be a different case if Standard Water were attempting to
execute by sheriff’s sale on a personal judgment, for example.
7As previously noted, the record suggests they moved into the house in 2014.
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V. Conclusion.
For the foregoing reasons, we affirm the judgment of the district
court. We affirm in part and vacate in part the decision of the court of
appeals.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND
VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED.
All justices concur except McDonald, J., who takes no part.