Terry D. Butler v. Wells Fargo Bank, N.A., and David M. Erickson

IN THE COURT OF APPEALS OF IOWA
No. 18-0654
Filed June 5, 2019
TERRY D. BUTLER,
Plaintiff-Appellant,
vs.
WELLS FARGO BANK, N.A., and DAVID M. ERICKSON,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Warren County, Timothy O'Grady,
Judge.
A plaintiff appeals the grant of summary judgment dismissing his claims.
AFFIRMED.
John H. Judisch and Robert M. Benton of Stuyvesant, Benton & Judisch,
Carlisle, and Allison M. Steuterman and Billy J. Mallory of Brick Gentry, P.C., West
Des Moines, for appellant.
Jesse Linebaugh, Angela Morales, and Kathryn Skilton of Faegre Baker
Daniels LLP, Des Moines, for appellee Wells Fargo Bank, N.A.
David H. Luginbill and Emily A. Kolbe of Ahlers & Cooney, P.C., Des
Moines, for appellee David M. Erickson.
Considered by Potterfield, P.J., and Tabor and Bower, JJ.
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BOWER, Judge.
Terry Butler appeals from the district court’s grant of summary judgment in
his action against Wells Fargo Bank, N.A. (Wells Fargo) and David Erickson.
Butler initiated these proceedings alleging several causes of action against Wells
Fargo and Erickson, counsel for Wells Fargo, following a foreclosure action. We
affirm.
I. Background Facts and Proceedings
Butler acquired two adjoining parcels of land, lot 1 and lot 2, totaling 10.27
acres, by warranty deed in 2009. He financed his purchase of the land with a
promissory note from Wells Fargo totaling $125,681.00. In issuing the promissory
note, Wells Fargo relied upon a report appraising the value of the combined
parcels. The note was secured by a mortgage, which was recorded at the Warren
County Recorder’s Office. However, the recorded mortgage’s description of the
secured land only made specific reference to lot 1. Eventually Butler defaulted on
the note, and Wells Fargo initiated a foreclosure proceeding and retained Erickson
as counsel. In an attachment to the foreclosure petition, the property to be
foreclosed upon was described using the legal description of lot 1 and a description
of lot 2.
Butler received notice of the foreclosure proceeding but never filed an
answer. Wells Fargo sought and received a default judgment. The county sheriff
auctioned off the land (both lot 1 and lot 2), and Wells Fargo purchased it. It then
transferred the land to a new owner through a quit claim deed. During this process,
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Erickson learned the description of lot 2 used in all prior documents1 varied from
its legal description by the omission of the word “acres.” Wells Fargo requested a
nunc pro tunc order to add “acres” to the description of lot 2 in the foreclosure
decree, and the court issued the nunc pro tunc order.
Butler initiated these proceedings, initially only naming Wells Fargo as a
defendant. Wells Fargo filed a pre-answer motion to dismiss, which was denied.
Butler then added Erickson as a party and amended his petition to assert eight
different causes of action related to the foreclosure proceeding and its impact to
lot 2. Butler’s eight claims alleged: (1) Wells Fargo and Erickson committed abuse
of process; (2) Wells Fargo breached its contracts with Butler; (3) Wells Fargo
converted lot 2; (4) Wells Fargo and Erickson committed fraudulent
misrepresentation by claiming Wells Fargo had an interest in lot 2; (5) Wells Fargo
was unjustly enriched from the foreclosure of lot 2; (6) Erickson was liable through
agent liability; (7) concert of action against Wells Fargo and Erickson; and (8) he
was entitled to specific performance from Wells Fargo to transfer title of lot 2 back
to him. Each claim was predicated on the proposition the mortgage did not include
lot 2.
Both defendants denied Butler’s allegations. Butler sought partial summary
judgment requesting the court declare Wells Fargo never held an interest in lot 2
and Wells Fargo sold or disposed of lot 2. Defendants sought summary judgment
to dismiss all of Butler’s claims. The district court denied Butler’s motion for partial
summary judgment in part, declining to declare Wells Fargo never had an interest
1
The deed issuing lot 2 to Butler also used the same incorrect legal description.
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in lot 2, and granted it in part, declaring Wells Fargo sold or disposed of lot 2.
Following a hearing, the district court granted the defendants’ motion for summary
judgment. It concluded Butler’s claims were barred by issue preclusion and claim
preclusion and the abuse of process claim also failed because Butler failed to
provide any evidence the defendants’ motivations during the foreclosure
proceeding were primarily carried out for an impermissible or illegal purpose.
Butler filed a motion for the district court to reconsider, enlarge, or amend its
summary judgment ruling, which the court denied.
Butler now appeals.
II. Scope and Standard of Review
“We review summary judgments for correction of errors at law.” Morris v.
Steffes Grp., Inc., 924 N.W.2d 491, 495 (Iowa 2019). “[W]e examine the record
before the district court to determine whether any material fact is in dispute, and if
not, whether the district court correctly applied the law.” Andersen v. Khanna, 913
N.W.2d 526, 535 (Iowa 2018) (alteration in original) (quoting Roll v. Newhall, 888
N.W.2d 422, 425 (Iowa 2016)). “A fact is material when its determination might
affect the outcome of a suit. A genuine issue of material fact exists when
reasonable minds can differ as to how a factual question should be resolved.” Id.(quoting Linn v. Montgomery, 903 N.W.2d 337, 342 (Iowa 2017)). “We view the
record in the light most favorable to the nonmoving party.” Id. “We draw all
legitimate inferences the evidence bears that will establish a genuine issue of
material fact.” Id. (quoting Linn, 903 N.W.2d at 342).
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III. Analysis
A. Issue Preclusion/Collateral Estoppel
The root of each of Butler’s claims stem from his assertion the mortgage did
not include lot 2 and the foreclosure decree did not foreclose upon lot 2.
Accordingly, defendants contend the district court correctly concluded issue
preclusion dictates each of Butler’s claims must fail because the foreclosure
proceeding already determined the mortgage included lot 2 and foreclosed upon
lot 2. “Collateral estoppel, or issue preclusion, prevents parties in a prior action
from relitigating issues raised and resolved in a previous action.” Stender v.
Blessum, 897 N.W.2d 491, 512 (Iowa 2017). The four elements of issue preclusion
are:
(1) the issue concluded must be identical; (2) the issue must have
been raised and litigated in the prior action; (3) the issue must have
been material and relevant to the disposition of the prior action; and
(4) the determination made of the issue in the prior action must have
been necessary and essential to the resulting judgment.
Linn, 903 N.W.2d at 344 (quoting Hunter v. City of Des Moines, 300 N.W.2d 121,
123 (Iowa 1981)).
Butler argues the district court erred in finding issue preclusion barred his
claims. We disagree. To be successful in the present action, Butler’s claims
require the court to find the mortgage did not include lot 2. However, when
foreclosing upon lot 2 in the foreclosure proceeding, the court necessarily found
the mortgage included lot 2. This issue is identical in both proceedings. Butler
argues lot 2 was never at issue in the foreclosure proceeding because lot 2’s
description in the foreclosure filings did not match its legal description because it
omitted the word “acres.” This argument is without merit. All descriptions of lot 2
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identified it in the same manner Wells Fargo utilized in the foreclosure filings. By
Wells Fargo’s use of the widely-used description of lot 2, it is apparent lot 2 was at
issue in the foreclosure proceeding.
Butler contends the issue was not raised and litigated in the foreclosure
proceeding because the court entered a default judgment, and issue preclusion
cannot apply. See Lynch v. Lynch, 94 N.W.2d 105, 108 (Iowa 1959) (“Collateral
estoppel is usually not available in default cases.”); Restatement (Second) of
Judgments § 27 cmt. e (Am. Law Inst. 1982). However, our supreme court has
previously concluded that a prior judgment “even though by default, is conclusive,
and, as such, estops [the] plaintiff” in a subsequent action. See Lynch, 94 N.W.2d
at 109. Certainly, Butler had his opportunity to challenge Wells Fargo’s assertion
the mortgage included lot 2 in the foreclosure proceeding and chose not to avail
himself of the opportunity. See id. (“Having failed to plead and prove that claim,
[the appellant] waived the right to relitigate the issue or claim and is barred or
estopped under the doctrine of res judicata.”). He cannot benefit now for his refusal
to participate in the foreclosure proceeding by reconsideration of lot 2’s inclusion
in the mortgage in the present action. See id. at 110 (“We have always recognized
that the underlying principle of the doctrine of . . . estoppel is that there should be
an end to litigation, and one who has had an opportunity for a full hearing on a vital
issue should not be permitted to relitigate that same issue again.”).
The final two elements of issue preclusion are easily met. The inclusion of
lot 2 in the mortgage was material and relevant because without its inclusion, the
court could not foreclose upon it. See Linn, 903 N.W.2d at 344. The determination
the mortgage included lot 2 was necessary and essential to the resulting
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foreclosure of lot 2. See id. As a result, we agree with the district court and
conclude issue preclusion/collateral estoppel prevents Butler from asserting the
mortgage did not include lot 2.
Nonetheless, Butler asserts he may collaterally attack the foreclosure
court’s conclusion the mortgage included lot 2 and foreclosure of lot 2 in this
proceeding because the foreclosure court lacked subject matter jurisdiction with
respect to lot 2. See Sanford v. Manternach, 601 N.W.2d 360, 364 (Iowa 1999)
(noting “a judgment is not subject to collateral attack except on jurisdictional
grounds”). Butler reasons because lot 2 is not referenced in the recorded
mortgage, the court lacked the necessary jurisdiction to foreclose upon it.
However, Butler’s assertion is again without merit. The jurisdiction of the district
court is not limited by agreements entered into by individual parties. Rather, our
district courts are courts of general jurisdiction, “empowered by the Iowa
Constitution to hear all cases in law and equity.” Schott v. Schott, 744 N.W.2d 85,
87 (Iowa 2008) (emphasis added); see also Iowa Const. art. V, § 6 (“The district
court shall be a court of law and equity, which shall be distinct and separate
jurisdictions, and have jurisdiction in civil and criminal matters arising in their
respective districts, in such manner as shall be prescribed by law.”); Iowa Code
§ 602.6101 (2016) (“The district court has exclusive, general, and original
jurisdiction of all actions, proceedings, and remedies, civil, criminal, probate, and
juvenile, except in cases where exclusive or concurrent jurisdiction is conferred
upon some other court, tribunal, or administrative body. The district court has all
the power usually possessed and exercised by trial courts of general jurisdiction,
and is a court of record.”). We conclude the district court had jurisdiction in the
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foreclosure action over lot 2. As a result, the court’s foreclosure decree foreclosing
lot 2 may not be collaterally attacked due to a lack of jurisdiction. See Schott, 744
N.W.2d at 88 (“We have repeatedly said a final judgment is conclusive on collateral
attack, even if the judgment was erroneous, unless the court that entered the
judgment lacked jurisdiction over the person or the subject matter.”). Butler
also argues he may collaterally attack the foreclosure court’s conclusion the
mortgage included lot 2 and the foreclosure of lot 2 because Wells Fargo and
Erickson fraudulently claimed the mortgage included lot 2 during the foreclosure
proceeding. However, Butler could have challenged the allegedly fraudulent
assertion, the mortgage included lot 2, during the foreclosure proceeding. Thus,
Butler’s claim of fraudulent conduct amounts to an assertion of intrinsic fraud,
which does not give rise to collateral attack. See City of Chariton v. J.C. Blunk
Constr. Co., 112 N.W.2d 829, 818 (Iowa 1962) (“[A]n equitable action to set aside
a judgment will lie where the fraud is extrinsic; it will not lie when it is intrinsic.”);
Waddy v. Cheatum, No. 01-0913, 2002 WL 1332495, at *2 (Iowa Ct. App. June
19, 2002) (“A collateral attack based on fraud cannot be predicated on issues
which were, or with due diligence could have been, presented and adjudicated in
the original proceeding.”).
Because issue preclusion/collateral estoppel prevent Butler from asserting
lot 2 was not included in the mortgage, he cannot prove an essential fact to all of
his claims and all of his claims necessarily fail
B. Claim Preclusion
The district court also determined Butler’s claims fail due to claim
preclusion. “The general rule of claim preclusion holds that a valid and final
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judgment on a claim bars a second action on the adjudicated claim or any part
thereof.” Pavone v. Kirke, 807 N.W.2d 828, 835 (Iowa 2011). In addition to issues
litigated in an initial proceeding, “[c]laim preclusion may preclude litigation on
matters the parties never litigated.” See id.To establish claim preclusion a party must show: (1) the parties in
the first and second action are the same parties or parties in privity,
(2) there was a final judgment on the merits in the first action, and
(3) the claim in the second suit could have been fully and fairly
adjudicated in the prior case . . . .
Id. at 836. On appeal, Butler contests each element of claim preclusion.
First, he asserts the parties in the foreclosure action and the instant action
are not the same or in privity because the parties to the foreclosure action included
Wells Fargo and himself while this action includes Wells Fargo, Butler, and
Erickson. However, “[i]n the defensive use of claim preclusion, the status test for
privity is broadly applied if the party against whom claim preclusion is invoked had
a full and fair opportunity to litigate the claim.” Shivvers v. Hertz Farm Mgmt., 595
N.W.2d 476, 481 (Iowa 1999). We conclude the parties were in privity and the first
element of claim preclusion is satisfied. Cf. Plotner v. AT&T Corp., 224 F.3d 1161,
1169 (10th Cir. 2000) (“The law firm defendants appear by virtue of their activities
as representatives of Green and AT & T, also creating privity.”).
Butler challenges the second element by again claiming the foreclosure
action was not decided on the merits because the foreclosure resulted from a
default judgment. However, “the fact a judgment is rendered by default does not
prevent it from operating as a basis for the application of the doctrine of res
judicata.” Lynch, 94 N.W.2d at 110.
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As to the third element, Butler claims he could not have fully and fairly
adjudicated his claim that lot 2 was not included in the mortgage for several
reasons. These reasons include: (1) the description of lot 2 used in the foreclosure
proceeding was not the correct legal description; (2) the lot was never part of the
mortgage; (3) the foreclosure proceeding specifically related the property
referenced in the recorded mortgage, lot 1 only; and (4) lot 2 was only included in
the proceedings by way of the nunc pro tunc after the proceeding’s conclusion.
None of Butler’s assertions have merit. The foreclosure petition made clear
reference to lot 2, putting Butler on notice it was at issue. The description of lot 2
was sufficiently similar to the legal description of lot, in fact it was the same as the
description given when lot 2 was deeded to Butler to begin with. Butler knew lot 2
was at issue in the foreclosure proceeding and instead elected to stand by rather
than assert his current claim, i.e. the mortgage did not cover lot 2.
We conclude the district court correctly found claim preclusion prevents
Butler from claiming the mortgage did not include lot 2 in this proceeding. Because
this claim is essential to Butler’s claims, we conclude the district court properly
granted summary judgment to the defendants on this basis as well.
C. Abuse of Process
With respect to Butler’s abuse of process claim against both defendants,
the district court concluded Butler failed to provide evidence of an essential
element and granted summary judgment on this basis as well. “An abuse-of-
process claim has three elements: (1) the use of a legal process (2) in an improper
or unauthorized manner (3) that causes the plaintiff to suffer damages as a result
of that abuse.” Gibson v. ITT Hartford Ins., 621 N.W.2d 388, 398 (Iowa 2001).
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Here the district court found Butler provided no evidence the defendants used the
legal process in an improper or unauthorized manner.
Butler asserts the defendants improper use occurred when requesting the
nun pro tunc order to add “acres” the description of lot 2 in the foreclosure decree.
He reasons lot 2 was only foreclosed upon when the nunc pro tunc was ordered
because all prior references did not use the correct legal description of lot 2. “An
order nunc pro tunc cannot be used to remedy an error in judicial thinking, a judicial
conclusion, or a mistake of law.” State v. Naujoks, 637 N.W.2d 101, 113 (Iowa
2001). However, the nunc pro tunc order in the foreclosure proceeding did not
remedy an error in thinking, conclusion, or legal error. Rather, it merely corrected
the description of lot 2 in the foreclosure decree by the addition of one word. It did
not add lot 2 to the decree after the fact. The motion for the nunc pro tunc order
does not provide any evidence of the defendants’ use of the legal process for an
improper or unauthorized manner.
With respect to the abuse of process claim, we conclude the district court
properly granted summary judgment to the defendants due to Butler’s failure to
provide evidence the defendants used the foreclosure proceeding for an improper
or unauthorized manner.
IV. Conclusion
We have considered each of the parties’ arguments on appeal, whether or
not directly addressed herein. Because each of Butler’s claims require he show
the mortgage did not include lot 2 and he cannot do so due to issue and claim
preclusion, we conclude the district court properly granted summary judgment in
favor of the defendants. With respect to Butler’s abuse of process claim, we
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conclude the district court also correctly found no evidence the defendants used
the legal process for an improper or unauthorized manner.
AFFIRMED.