Lincoln Savings Bank v. Debra D. Emmert

IN THE SUPREME COURT OF IOWA
No. 20–1663
Submitted January 19, 2023—Filed February 24, 2023
LINCOLN SAVINGS BANK,
Appellee,
vs.
DEBRA D. EMMERT,
Appellant,
and
SIMPSON FURNITURE COMPANY, EMMERT MANAGEMENT, LLC, DALE T.
EMMERT, IOWA DEPARTMENT OF REVENUE and BERGEN PLUMBING, INC.,
Defendants.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Black Hawk County, Linda M.
Fangman, Judge.
A defendant seeks further review of the court of appeals decision that
affirmed a default judgment in a foreclosure case. DECISION OF COURT OF
APPEALS VACATED; DISTRICT COURT JUDGMENT REVERSED AND
REMANDED.
McDermott, J., delivered the opinion of the court in which all participating
justices joined. McDonald and May, JJ., took no part in the consideration or
decision of the case.
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Gregg A. Geerdes (argued), Iowa City, for appellant.
David T. Bower (argued), Jeffrey W. Courter, and Roy R. Leaf of Nyemaster
Goode, P.C., Des Moines, for appellee.
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McDERMOTT, Justice.
The initial steps in a typical lawsuit are straightforward. A plaintiff files a
petition with the court that alleges a claim against a defendant and then serves
the defendant with the petition. The defendant, in turn, files an answer or other
document responding to the petition within a specified time. If the defendant
fails to file any response by the deadline, the plaintiff may apply for a default
judgment against the defendant.
But the law favors resolution of disputes on their merits, not through
procedural defaults. And to help ensure that defaults are entered based on
informed choice, not oversight, our rules of civil procedure require an extra step
in the process. The court will not give a default judgment unless the plaintiff first
sends, in writing, a “notice of intent” to file an application for default judgment.
The notice serves as a move-it-or-lose-it warning that the plaintiff intends to ask
for a default judgment unless the defendant files a response within ten days.
When a defendant is known to be represented by a lawyer, our rules
require the plaintiff to send a copy of the notice of intent to the lawyer. The
question in this appeal—one that this court has never been presented with in
any previous case—is whether the plaintiff must send a copy of the notice of
intent to the defendant in addition to the defendant’s lawyer.
I. The Foreclosure Lawsuit and Entry of the Default Judgment.
Debra Emmert and her then-husband owned and operated a furniture
store and a related management company. The furniture store and management
company took out about $5 million in loans from Lincoln Savings Bank. As
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security for the loans, the bank took mortgages on two properties, security
interests in certain business and personal property, and a personal guaranty
from Emmert. When loan payments failed to arrive, the bank filed a petition to
foreclose the mortgages and security interests.
The bank served the foreclosure lawsuit on an attorney named Phillip
Brooks. The parties dispute the scope of Brooks’s representation of Emmert in
this matter. Emmert argues that Brooks had represented her on a matter
unrelated to the bank’s foreclosure lawsuit (a replevin action), while the bank
argues that Brooks was communicating and holding himself out as Emmert’s
lawyer in the foreclosure lawsuit. Putting aside for the moment questions about
the scope of Brooks’s representation, the record shows that Brooks filed an
acceptance of service of the foreclosure petition on Emmert’s behalf and that
neither Brooks nor Emmert, nor anyone else acting on Emmert’s behalf, filed
any response to the petition.
After the deadline to file a responsive pleading had passed, the bank
mailed a written notice of intent to file for a default judgment to Brooks. The
bank did not separately mail any notice of intent to Emmert. A few months later,
the bank filed its application for default judgment. The district court promptly
entered a default judgment against Emmert and the other defendants.
Some months later, the bank asked the court for permission to amend the
petition against the defendants (even though the court had already entered a
default judgment) based on the bank’s purchase of a senior mortgage on one of
the foreclosed properties. The district court granted the bank permission to
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amend, and the bank refiled its petition against Emmert and the other
defendants. The bank sent Brooks a copy of the newly-amended petition by
certified mail.
The ensuing events began to unfold just as before. No one filed any
response to the petition by the deadline. The bank mailed a written notice of
intent to file for a default judgment to Brooks (but not to Emmert). The bank
timely filed its application for default judgment, which the district court again
promptly granted. The bank thereafter provided information to the district court
for entry of a detailed foreclosure judgment that reflected the updated amount of
the debt and other particulars.
But while that foreclosure judgment remained outstanding, lawyer Gregg
Geerdes filed an appearance in the case on Emmert’s behalf. Geerdes filed no
other documents with his appearance. About three weeks later, the court entered
the foreclosure judgment against Emmert and the other defendants. Within a
couple of hours, Geerdes filed a motion asking the court not to enter the
foreclosure judgment (too late, as it turned out) or, in the alternative, to set aside
the foreclosure judgment.
The district court took no action on Geerdes’s motion not to enter, or to
set aside, the foreclosure judgment. Two weeks later, Emmert (represented by
Geerdes) appealed the foreclosure judgment. Nearly two months after filing the
appeal, she moved in the district court to set aside the default judgment and to
enlarge and reconsider the foreclosure judgment. We transferred the appeal to
the court of appeals. The court of appeals correctly concluded that the district
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court lacked the power to rule on the motions filed after her notice of appeal
because her appeal divested the district court of jurisdiction. See State v. Mallett,
677 N.W.2d 775, 777 (Iowa 2004). On Emmert’s other claims, the court of
appeals determined that the bank satisfied the notice rule by mailing the notice
of intent only to Brooks and affirmed the district court’s default judgment.
Emmert applied for further review, which we granted.
Emmert is the only defendant challenging the notice and the resulting
default judgment. She makes two arguments relevant to our resolution of this
appeal, both centered on the “notice of intent” that the bank was required to
send. First, she argues that notice to Brooks was improper because Brooks was
not her attorney and had never been the attorney of record in this matter.
Second, she argues that even if Brooks had been serving as her lawyer in this
matter, sending notice to Brooks alone wasn’t enough—the bank needed to send
the notice of intent to her in addition to her lawyer.
II. Iowa Rule of Civil Procedure 1.972 and Whether the Bank Was
Required to Send a Copy of the Notice of Intent to Emmert.
The outcome of this appeal hinges on our construction of Iowa Rule of Civil
Procedure 1.972, which is the rule that sets out the requirements for obtaining
a default judgment. We review the interpretation of our rules of civil procedure
under a “correction of errors at law” standard, and thus we conduct our own
analysis without deference to the lower court’s interpretation. See McGrew v.
Otoadese, 969 N.W.2d 311, 319 (Iowa 2022). Failing to comply with the notice
provisions of the rule leaves the district court “without authority to enter the
order of default.” Dolezal v. Bockes, 602 N.W.2d 348, 352 (Iowa 1999). Despite
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the untold hundreds (if not thousands) of cases that have ended in default
judgments in Iowa courts in the decades since the notice-of-intent requirement
came into being, we’ve somehow never had a case addressing the particular
question before us.
The rule states in relevant part:
1.972(2) Application. . . . No default shall be entered unless
the application contains a certification that written notice of
intention to file the written application for default was given after
the default occurred and at least ten days prior to the filing of the
written application for default. A copy of the notice shall be attached
to the written application for default. . . .
1.972(3) Notice.
a. To the party. A copy of the notice of intent to file written
application for default shall be sent by ordinary mail to the last
known address of the party claimed to be in default. No other notice
to a party claimed to be in default is required.
b. Represented party. When a party claimed to be in default is
known by the party requesting the entry of default to be represented
by an attorney, whether or not that attorney has formally appeared,
a copy of notice of intent to file written application for default shall
be sent by ordinary mail to the attorney for the party claimed to be
in default. This rule shall not be construed to create any obligation
to undertake any affirmative effort to determine the existence or
identity of counsel representing the party claimed to be in default.
c. Computation of time. The ten-day period specified in rule
1.972(2) shall begin from the date of mailing notice, not the receipt
thereof.
d. Form of notice. The notice required by rule 1.972(2) shall be
substantially as set forth in rule 1.1901, Form 10.
Iowa R. Civ. P. 1.972(2)–(3).
Emmert urges that we read paragraphs (a) and (b) of rule 1.972(3) as
conjunctive, as if the list is joined by the word and, thus requiring notice to the
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party and also to the party’s lawyer if the party is known to be represented. The
bank, conversely, urges that we read paragraphs (a) and (b) as disjunctive,
requiring notice to the party if the party is not known to be represented but
requiring notice only to the lawyer if the party is known to be represented.
In 1997, we amended what is now rule 1.972 to include a notice-of-intent
mailing requirement. That rule change followed our decision a few years earlier
in Central National Insurance Co. of Omaha v. Insurance Co. of North America,
513 N.W.2d 750, 757 (Iowa 1994). In that case, a defendant tried to set aside a
default judgment because the plaintiff failed to notify the defendant’s lawyer
before filing an application for a default judgment. Id. at 754. At the time, our
default judgment rule was silent about any notice requirements before seeking
a default. Id. The defendant argued that the plaintiff’s failure to notify opposing
counsel violated longtime “custom and practice generally followed by attorneys”
in that county. Id.Construing the language of the rule at the time, we determined that the
rule afforded the defendant no relief; the custom and practice of attorneys in that
county wasn’t enough to impose a legal requirement. Id. But we rhapsodized
about the benefits of a potential rule requiring notice before a court could enter
a default judgment. Id. Such a rule, we said, might avoid “bungles”—excusable
oversights—that resulted in default judgments, thus making our rule “more fair
and consistent.” Id. at 757. We noted that one state, Pennsylvania, had already
adopted a rule requiring notice to all defaulting parties. Id. Our aspiration was
clearly stated: “Notice to all defaulting parties—not just those represented by
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counsel—should be given.” Id. And within a few years, we revised the rule to
require sending a written notice of intent before seeking a default judgment—as
it now appears in rule 1.972 (as block-quoted above).
But while our discussion of the notice of intent in Central National
Insurance addressed the benefits of requiring notice, we didn’t explicitly define
who must be served notice. The text of the Pennsylvania rule that we referred to
specified that the notice go to both the party and the party’s lawyer, requiring
notice “mailed or delivered . . . to the party against whom judgment is to be
entered and to the party’s attorney of record, if any.” Pa. R. Civ. P. 237.1(a)(2)(ii)
(1994) (emphasis added). The text of Iowa’s rule tracks, but doesn’t mirror,
Pennsylvania’s rule.
Both sides in this case nonetheless point to the Pennsylvania rule to
support their proposed construction. Emmert urges that we read Iowa’s rule to
correspond to Pennsylvania’s rule—and its requirement for notice to both party
and lawyer—based on our reference to it in Central National Insurance. The bank,
conversely, urges that we read the absence of the word and between “party” and
“attorney” in paragraphs (a) and (b) in rule 1.972(3) as a deliberate choice that
shows an intent not to require mailing of the notice to both party and lawyer as
Pennsylvania’s rule did.
Both parties’ arguments on this point, in our view, put a little too high a
premium on our mention of the Pennsylvania rule. We noted it as one example
of a pre-default notice requirement, stating simply that “[o]ne state has done just
that,” followed by a cite to the rule number and this parenthetical note: “(ten
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days[’] notice of intent to take default required).” Cent. Nat. Ins., 513 N.W.2d at
757. Our mention of the Pennsylvania rule on the general issue of a notice
requirement, such as it was, provides dim light to illuminate the more granular
question presented in this case about the required recipients of the plaintiff’s
notice.
In their treatise on interpreting texts, Justice Scalia and Bryan Garner
discuss the “conjunctive/disjunctive canon” and how to construe multi-element
lists that include, or fail to include, conjunctions such as and or or. Antonin
Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 116–25
(2012) [hereinafter Scalia & Garner]. They describe a rhetorical technique—
called asyndeton—in which “drafters will omit conjunctions altogether between
the enumerated items.” Id. at 118–19. When a drafter does not include a
conjunction, the text “is generally considered to convey the same meaning . . .
as though and were inserted between the items.” Id. at 119. In other words,
“asyndeton (absence of conjunction) is normally equivalent to syndeton (use of
the conjunction and).” Id. at 124. This interpretative canon generally supports
Emmert’s argument that paragraphs (a) and (b) of rule 1.972(3) should be read
in the conjunctive form.
The bank argues that the reference to “notice” in its singular form
throughout the rule indicates that only one notice is required. The bank recites
that the rule requires the application for default judgment include a certification
that “written notice of intention to file” the application was given and that “a copy
of the notice shall be attached.” Iowa R. Civ. P. 1.972(2) (emphases added). These
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references to notice in the singular seem to point in the bank’s direction. But
other language in the rule blunts the force of the bank’s argument. The language
from rule 1.972(2) (“[a] copy of the notice”) and paragraphs (a) (“[a] copy of the
notice of intent”) and (b) (“a copy of notice of intent”) of rule 1.972(3) all refer to
delivery of a copy of the notice, not an actual notice of intent document itself.
Id. rs. 1.972(2), 1.972(3)(a)–(b). In this way, the rule seems to contemplate that
the lawyer might retain an original version but make copies of the notice (1) for
filing with the application for default judgment under rule 1.972(2), and (2) for
mailing under rule 1.972(3). Reading the rule in full, the use of “notice” in the
singular does little to advance the bank’s proposed construction.
We also find the rule’s headings instructive. Although titles and headings
can’t override the plain words of a text, they are permissible aids in resolving
textual ambiguities. Des Moines Flying Serv., Inc. v. Aerial Servs. Inc., 880 N.W.2d
212, 220–21 (Iowa 2016) (citing Scalia & Garner at 221). The heading to
paragraph (a) of rule 1.972(3) uses the phrase “[t]o the party,” and paragraph (b)
uses the phrase “[r]epresented party.” Iowa R. Civ. P. 1.972(3)(a)–(b). If the
mailing requirements were meant to be disjunctive, one might expect paragraph
(a) to have a more descriptive heading that refers to the party’s lack of
representation, such as “unrepresented party” (or even, “to the party not known
to be represented by an attorney”). The headings as written suggest that
paragraph (a) requires a notice mailed “to the party” regardless of whether the
party is represented, with paragraph (b) requiring an additional notice when the
party is “represented.” Id.12
Paragraph (d) of rule 1.972(3) further supports a conjunctive reading of
this rule. Titled “Form of notice,” paragraph (d) states that “[t]he notice required
by rule 1.972(2) shall be substantially as set forth in rule 1.1901, Form 10.” Id. r.
1.972(3)(d). Here is the entirety of Form 10:
Several points stand out. The addressee that’s identified (“TO:”) suggests
insertion only of the “(defendant)” and not, for instance, “(or defendant’s counsel,
as applicable).” And the language of the actual notice itself makes repeated
reference to “YOU.” In the context of the addressee line, we can expect that the
“YOU” refers to the defendant. Reading the language of the notice leaves no doubt
about this. “YOU”—the party in this lawsuit—are in default; not the lawyer. A
default will be entered against “YOU”—the defendant; a default judgment isn’t
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entered against the lawyer. “YOU”—the defendant—may lose your property or
important rights; the lawyer doesn’t have property or rights at stake in the case.
“YOU”—the party in this lawsuit—should seek legal advice at once; the lawyer
obviously doesn’t need to seek advice since the lawyer is the one presumed to
possess the legal knowledge. The required notice form, in our view, supports a
conjunctive interpretation of the rule that requires notice mailed to the defendant
in all cases, with a copy to the defendant’s lawyer if the defendant is represented.
The bank argues that reading rule 1.972 to require mailing a notice to both
a party and the party’s lawyer would run afoul of attorney ethics rules, and thus
that such an interpretation could not have been intended. The ethics rule in
question, Iowa Rule of Professional Conduct 32:4.2(a), forbids a lawyer to
communicate “about the subject of the representation with a person the lawyer
knows to be represented by another lawyer in the matter, unless the lawyer has
the consent of the other lawyer or is authorized to do so by law or a court order.”
But the carveout at the end of the ethics rule—“unless the lawyer . . . is
authorized to do so by law”—leaves this argument begging the question. In other
words, the argument’s premise (requiring notice to a represented party violates
an ethics rule) assumes the truth of the conclusion (the default notice rules
shouldn’t require violations of an ethics rule). If we construe rule 1.972 to require
notice to both the party and the party’s lawyer, no ethical violation occurs
because the lawyer is authorized to do so by law. The ethics rule thus doesn’t
illuminate, let alone dictate, the requirements of our notice rule.
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The bank also argues that we must construe the text to find service of the
notice sufficient when sent only to the party’s lawyer since such a reading avoids
disharmony with our procedural rules about service of other papers in lawsuits.
Iowa Rule of Civil Procedure 1.442(1) states that “[u]nless the court otherwise
orders, everything required to be filed by the rules in this chapter . . . [including]
every written notice . . . shall be served upon each of the parties.” The next rule
states that when a party is represented by a lawyer, service “shall be made upon
the attorney unless service upon the party is ordered by the court.” Id. at
1.442(2). But this argument, much like the one before, begs the question. The
premise assumes that service on both the defendant and the defendant’s lawyer
isn’t required by another rule. If we construe rule 1.972(3) to require service on
the party in addition to the party’s lawyer, there’s no disharmony with rule 1.442.
Cf. Iowa R. Civ. P. 1.517(1)(e) (entitled “Notice to litigants” and requiring that an
order compelling discovery be served on both counsel and the party or parties
whose conduct necessitated the motion to compel).
As a final matter, we return to a point we made in Central National
Insurance about the benefits of requiring a notice-of-intent mailing before
seeking a default judgment. Notice helps to avoid the “bungles”—excusable
neglect in responding to the petition—that prevent parties from defending
against claims on the merits. 513 N.W.2d at 757. There exists “a longstanding
policy in our state favoring the resolution of legal disputes on the merits,” and
consistent with that longstanding policy, “default judgments are disfavored.”
No Boundry, LLC v. Hoosman, 953 N.W.2d 696, 699 (Iowa 2021). Our default
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judgment rules rest on the notion that a defendant’s failure to respond to a
lawsuit communicates an intent to concede the claim and accept the
consequences, akin to a knight in Arthurian legend declaring “I yield” to
surrender in a swordfight. See T.H. White, The Once and Future King 62, 344
(1939). Construing rule 1.972 as we do today—requiring plaintiffs to send the
ten-day notice of intent to file an application for default to both the party and, if
known, the party’s counsel—provides stronger protection against default
judgments entered based on oversight instead of volition.
III. Conclusion.
We hold that rule 1.972(3) required the bank to mail notice of intent to
both Emmert and Emmert’s lawyer. The bank’s failure to comply with the rule’s
notice provisions left the district court without authority to enter the default
judgment against Emmert. See Dolezal, 602 N.W.2d at 353. Today’s decision
does not affect the finality of judgments. If notice of intent was not mailed as
required by rule 1.972(3) and a judgment was entered before the date of this
decision, that judgment may be attacked only by an otherwise proper and timely
postjudgment motion or appeal. Because we find in Emmert’s favor on her
challenge on this ground, we need not resolve her separate argument that Brooks
did not represent her in this matter and thus that mailing to Brooks alone was
insufficient.
We vacate the court of appeals decision, reverse the district court’s default
judgment, and remand this case to the district court to proceed against Emmert
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only since only she has mounted a challenge to the default judgment. The
judgment entered against other defendants remains undisturbed.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT
JUDGMENT REVERSED AND REMANDED.
McDonald and May, JJ., take no part.