Thompson Family Holdings, LLC v. James Martin and Frank Martin III

IN THE COURT OF APPEALS OF IOWA
No. 15-0693
Filed December 23, 2015
THOMPSON FAMILY HOLDINGS, LLC,
Plaintiff-Appellee,
vs.
JAMES MARTIN and FRANK MARTIN III,
Defendants-Appellants.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Ian K. Thornhill,
Judge.
Brothers, who received certain real estate by an executor’s deed from
their grandmother’s estate, appeal the district court’s decision granting summary
judgment to the successor in title to a sheriff’s deed to the same property.
AFFIRMED.
Jonathan Kramer of Whitfield & Eddy, P.L.C., Des Moines, for appellants.
Catherine E. Hult of Lane & Waterman, Davenport, for appellee.
Heard by Vogel, P.J., and Vaitheswaran and Bower, JJ.
2
VOGEL, Presiding Judge.
James Martin and Frank Martin III (the Martins) appeal the district court’s
decision granting summary judgment to Thompson Family Holdings, LLC
(Thompson), in its quiet title action regarding certain real property located in Linn
County. On appeal, the Martins claim the court incorrectly determined a 1992
sheriff’s deed conveyed their grandmother’s interest in the property despite the
fact their grandmother’s estate was not made a party to the foreclosure
proceedings. Instead, the Martins assert Iowa Code section 633.93 (2013) acts
to protect their 1994 executor’s deed as superior title. They also challenge the
court’s interpretation of Iowa Code section 614.22. Finally, the Martins claim the
district court erred in finding equitable considerations applied to quiet title in favor
of Thompson.1 Because we agree with the district court that section 614.22
applies to make the sheriff’s deed unassailable, we affirm the district court’s grant
of summary judgment and remand for the entry of the final judgment in
Thompson’s favor.
I. Background Facts and Proceedings.
The property in question was conveyed to Helen M. Martin by warranty
deed recorded in 1968. In 1986, Helen transferred a one-third undivided interest
1
We note the Martins filed their notice of appeal following the district court’s ruling on the
cross-motions for summary judgment. No final judgment had been entered at the time
the notice of appeal was filed, and the district court had directed Thompson to submit a
proposed decree to “effectuate the relief sought in the petition and that sets forth an
accurate procedural history for the action.” The appeal therefore is interlocutory in
nature. However, when a notice of appeal is filed rather than an application for
interlocutory appeal, the action shall not be dismissed but should proceed as if the
proper form of review had been sought. Iowa R. App. P. 6.108. By an order before the
case was transferred to this court, the supreme court directed the notice of appeal was
to be considered an application for interlocutory appeal and granted the application. We
will thus proceed to address the merits.
3
in the property to her two sons, Frank Lewis Martin II (Frank II) and Michael
Frank Martin, as tenants in common. Michael died in 1987 and was survived by
his wife, Diane G. Martin, and five children. The entire property was mortgaged
to Merchants National Bank of Cedar Rapids (the Bank) that same year by
Helen, Frank II, and Michael’s Estate by the executor, Diane, for $400,000 to
secure debt to Martin Brothers Equipment and Supply Company. Helen died in
1990, and her son, Frank II, was appointed executor. Under Helen’s will, the
property, along with the residuary of Helen’s estate after payment of debts and
burial expenses, was devised one-half to Frank II and one-half to Michael’s five
children.
Five months after Helen’s death, the Bank initiated foreclosure
proceedings on the entire property. The Bank named as defendants Frank II,
individually; Frank II’s wife; Diane, individually and as executor of Michael’s
estate; Michael’s five children; and the corporate entities of the parties—Twenty-
Seven Ten, Inc.2 and Martin Brothers Equipment and Supply Company. The
petition specifically identified the mortgage Helen executed on her two-thirds
interest in the property in question, along with the mortgages signed by Frank II
and Michael’s estate’s executor (Diane) for their one-third interest. It also noted
that Frank II and Michael’s children were named as party defendants because of
their interest in the subject property by virtue of being beneficiaries under Helen’s
will.
2
The only asset of this company was the real estate in question and the building used
by Martin Brothers Equipment and Supply Company. Helen owed approximately 61% of
the corporation at the time of her death.
4
The final report, filed July 16, 1992, in Helen’s estate, stated her two-thirds
interest in the property had been foreclosed in a judgment entered in October
1991. It also stated the property had been sold at sheriff’s sale on December 27,
1991. A sheriff’s deed was issued to the foreclosing bank in June 1992
describing the entirety of the property in question. Firstar Bank of Cedar Rapids,
N.A, as successor in interest to Merchant’s, then conveyed the property to the
Small Business Administration, which then conveyed it to Edmund F. Conroy and
Carol A. Conroy in 1993. The Conroys conveyed the property by quit claim deed
to Claddagh, L.C., in 1993.
Meanwhile, four of Michael’s five children objected to the final report
entered in Helen’s estate, raising claims against Frank II alleging
mismanagement of the estate, particularly the property in question and Helen’s
stock in Twenty-Seven Ten, Inc. In its ruling on the objection, the court noted
Helen’s estate was not made a party to the foreclosure proceedings, and
therefore, the stock in Twenty-Seven Ten, Inc. remained to be resolved. A
motion to amend or enlarge was overruled by the court, and both Frank II and
four of Michael’s children appealed. However, that appeal was dismissed by
agreement of the parties, and a supplemental final report was filed in Helen’s
estate noting Michael’s children each received a sum of $24,000 in full
satisfaction of any and all claims against the estate. All other estate assets
passed to Frank II as the remaining sole beneficiary. Then Frank II, as the
executor, sold the property in question to his sons, Frank III and James (the
Martins), for less than $500 by an executor’s deed dated and filed on March 2,
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1994. The court approved the supplemental final report and closed Helen’s
estate on March 4, 1994.
Claddagh, L.C. held the property from 1993 until 2008 when it sold the
property to Thompson on contract. A special warranty deed given in satisfaction
of the contract was recorded December 28, 2012.
Thompson filed a petition to quiet title on March 15, 2013, seeking to
remove the cloud on the title created by Frank II’s conveyance of the property by
executor’s deed to his sons, the Martins, in March 1994.3 Both parties filed
respective motions for summary judgment. The court issued its decision March
25, 2015, granting summary judgment in favor of Thompson. The court
concluded under Iowa Code section 614.22(2) the 1992 sheriff’s deed was a
valid and unimpeachable conveyance of title where no action to challenge the
deed was filed within ten years of the recording of the deed. The court
concluded there was no interest for Helen’s estate to convey because the
sheriff’s deed conveyed the interest to the Bank and this conveyance was not
timely challenged. Because the court found section 614.22 dispositive, it did not
reach the issues of the effect of sections 633.350, 614.17A(1), or 633.93.
However, the court did go on to find that the equitable principles of laches and
estoppel applied to prevent the relief the Martins sought. The court noted
Thompson’s predecessors in title had been in exclusive possession of the
3
As part of the quiet title action, Thompson sought to reopen Helen’s estate. The estate
was reopened by the district court, but on appeal to this court, the estate was ordered
closed because “resolving the effect of the deed held by the Martins on Thompson’s
record title requires the Martins as necessary parties but does not require the estate.” In
re Estate of Martin, No. 14-0474, 2014 WL 7343756, at *7 (Iowa Ct. App. Dec. 24,
2014).
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property since 1992, maintaining the property, paying all applicable taxes and
assessments, and investing money into the property. The court concluded it
would be “unfair and wrong” to award the Martins an interest to the property
when Thompson “has so obviously provided all care and maintenance of the
property since 1992.”
II. Scope and Standard of Review.
While an action to quiet title is heard in equity, normally making our review
de novo, our review in this case is for correction of errors at law since we are
reviewing the district court’s grant of summary judgment to Thompson. See
Baratta v. Polk Cty. Health Servs., 588 N.W.2d 107, 109 (Iowa 1999).
Summary judgment is appropriate only when the entire
record including pleadings, discovery and affidavits on file shows
that there is no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. A “genuine” issue of
material fact exists if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party. A fact is “material”
only when its determination might affect the outcome of the suit. In
reviewing the grant or denial of a motion for summary judgment, we
examine the evidence in a light most favorable to the nonmoving
party.
Id. (internal citations omitted).
III. Discussion.
The parties agree that the executor of Helen’s estate was not named as a
defendant in the foreclosure proceeding.4 Frank II was named in his individual
4
Iowa Code section 633.350 provides that upon a person’s death title to real and
personal property passes to those to whom it is devised by will or statute, subject to the
possession of the personal representative and the control of the court for purposes of
administration, sale, or other disposition. See also DeLong v. Scott, 217 N.W.2d 635,
637 (Iowa 1974) (“The rule has long been established in Iowa that title to a decedent’s
real property passes instantly to devisees under his will and, in the absence of a will, to
statutory heirs, subject to possession by the decedent’s personal representative during
probate proceedings for purposes of administration, sale, or other disposition under
7
capacity, as were the other five heirs—Michael’s five children. However, it is
undisputed the executor and all heirs had actual notice of the foreclosure
proceedings, as well as the sheriff’s sale, as this information was contained
within both the final report and the supplemental final report filed in Helen’s
estate. In addition, it is clear the executor of Helen’s estate and the heirs were
aware of the problem with the Bank failing to name the executor as a defendant
in the foreclosure proceeding. However, neither the executor nor the heirs
brought an action to challenge the sheriff’s deed, which was recorded June 25,
1992, and the deed specifically conveyed all of the property in question, not just
the one-third portion that had been mortgaged by Frank II and Michael’s
executor. Despite being aware of the foreclosure proceeding and the
proceeding’s impact on the ownership of the property in question, neither the
executor nor any of the heirs brought an action to challenge the sheriff’s deed
within the time prescribed in section 614.22(2).
Iowa Code section 614.22(2)(a) provides:
On and after January 1, 1992, an action shall not be
maintained to set aside, cancel, annul, declare void or invalid, or to
redeem from a tax deed, guardian’s deed, executor’s deed,
administrator’s deed, receiver’s deed, referee’s deed, assignee’s
deed, or sheriff’s deed, if the deed has been recorded in the office
provisions of law.”). Thus, the Martins are incorrect to assert that Helen’s estate itself
should have been made a party to the foreclosure proceeding. As the estate cannot
own property, the estate itself had no interest in the foreclosure proceeding. It is the
personal representative of the estate that should have been listed as a defendant in the
foreclosure proceedings along with the heirs as the personal representative has the
rights of the legal title holders for administration purposes only. In re Estate of Ferris, 14
N.W.2d 889, 899 (Iowa 1944) (“The administrator of an intestate estate takes
possession of and administers its assets as an express trustee of the creditors, heirs,
spouse, and others properly interested therein. He may have the rights of the legal title
holders for administration purposes, but the equitable title and the beneficial interest in
the residuum is in the spouse and heirs as fixed by the statutes of descent and
distribution.”).
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of the recorder for more than ten years. The deed must be
recorded in the office of the recorder of the county or counties in
which the land described in the deed is situated. If an action under
this subsection is not commenced within ten years of the recording
of the deed, then the deed and all proceedings upon which the
deed is based are valid and unimpeachable and effective to convey
title as stated in the deed, without exception for infancy, mental
illness, absence from the state, or other disability or cause.
Under the statute, the Martins were afforded ten years to challenge the sheriff’s
deed from the date it was recorded. They did not do so; instead, they only
challenged the sheriff’s deed in response to Thompson’s quiet title action in
2013. Because more than ten years has passed since the sheriff’s deed was
recorded, it is now “valid and unimpeachable and effective to convey title as
stated in the deed.” Iowa Code § 614.22(2)(a). The sheriff’s deed states it
conveys the entirety of the property in question. The claims the Martins make
challenging the validity of the sheriff’s deed to convey Helen’s two-thirds interest
in the property are time-barred. See Dahms v. Alston, 34 N.W. 182, 182–83
(Iowa 1887) (noting a minor, who was not named as a defendant in a foreclosure
proceeding, was time-barred from challenging the sheriff’s deed).
The Martins claim that Iowa Code section 633.93 applies to protect their
“executor’s deed.” That code section provides: “No action for recovery of any
real estate sold by any fiduciary can be maintained by any person claiming under
the deceased, the ward, or a beneficiary, unless brought within five years after
the date of the recording of the conveyance.” The executor’s deed was recorded
in 1994; thus the Martins claim their deed became unassailable in 1999, three
years before the sheriff’s deed became final under section 614.22. While the
district court did not address the application of section 633.93, as it found section
9
614.22 dispositive, we conclude section 633.93 does not apply in this case. For
section 633.93 to apply to protect the Martins’ executor’s deed, Thompson would
need to be seeking recovery of the property under the deceased or a beneficiary.
Such is not the case here. Thompson is claiming title to the property through a
separate conveyance—the sheriff’s deed—which was adverse to Helen’s
property interest, not through a conveyance from Helen or a beneficiary.
Finally, the Martins claim the district court erred in its determination that it
would be inequitable to award title to the property to them. Because we affirm
the district court’s decision based on section 614.22(2)(a)’s application to bar the
Martins from challenging the 1992 sheriff’s deed, we need not address the district
court’s alternative equitable ruling. Therefore, we affirm the district court’s grant
of summary judgment and remand for entry of the final judgment in Thompson’s
favor.
AFFIRMED.