GreenState Credit Union v. Property Holders, Ltd.

IN THE COURT OF APPEALS OF IOWA
No. 21-0498
Filed June 15, 2022
GREENSTATE CREDIT UNION,
Plaintiff-Appellee,
vs.
PROPERTY HOLDERS, LTD., and CHARLES DAVISSON,
Defendants-Appellants,
and
PARTIES IN POSSESSION,
Defendants.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Lars Anderson, Judge.
Defendants appeal the district court’s grant of summary judgment to
GreenState Credit Union on its mortgage foreclosure claims. AFFIRMED AND
REMANDED.
Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellants.
Siobhan Briley and Ryan J. Prahm of Pugh Hagan Prahm PLC, Coralville,
for appellee.
Considered by May, P.J., Greer, J., and Carr, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206
(2022).
2
CARR, Senior Judge.
Property Holders, Ltd. and Charles Davisson (together Property Holders)
appeal the district court’s grant of summary judgment for GreenState Credit Union
on its mortgage foreclosure claims. GreenState’s acceptance of a payment after
the debt was accelerated is not a waiver of its right to collect the full amount owed.
We determine the district court did not abuse its discretion in ordering Property
Holders to pay trial attorney fees. We remand to the district court for a
determination of appellate attorney fees.
I. Background Facts & Proceedings
This case involves eight consolidated mortgage foreclosure actions. 1 In
each case, Property Holders obtained a loan by a promissory note from
GreenState that was secured by a mortgage on real property in Cedar Rapids. 2
Property Holders failed to make payments in November 2019 as required by the
promissory notes and came into default.
1 EQCV094983 involves a debt of $113,132.00 for two properties and was filed on
February 14, 2020. EQCV094985 involves a debt of $84,416.09 for a property
and was filed on February 14. EQCV095003 involves a debt of $83,373.76 for a
property and was filed on February 18. EQCV095004 involves a debt of
$65,731.40 on a property and was filed on February 18. EQCV095008 involves a
debt of $52,229.67 on a property and was filed on February 18. EQCV095015
involves a debt of $365,695.25 on six properties and was filed on February 19.
EQCV095024 involves a debt of $61,990.08 on a property and was filed on
February 20. EQCV095025 involves a debt of $74,098.53 on a property and was
filed on February 20.
GreenState additionally filed a mortgage foreclosure action against
Property Holders, EQCV095000, which was subsequently dismissed because the
mortgage indebtedness was paid in full. That action is not a subject of this appeal.
2 Davisson is the owner of Property Holders, and he personally guaranteed the
obligations.
3
On November 19, GreenState gave Property Holders a fifteen-day notice to
cure. The debt was not cured within fifteen days. On December 16, GreenState
gave notice that the outstanding debt was accelerated and was due within fourteen
days. Property Holders did not timely pay the accelerated balance. In February
2020, GreenState filed actions in district court to foreclose the mortgages.
In July, Property Holders made a payment at a GreenState branch office
and the payment was applied to the debts of Property Holders. In its answer to
the petitions filed by GreenState, Property Holders stated it had continued to make
periodic payments on the debts and these payments were accepted by
GreenState. Property Holders claimed GreenState waived any right to accelerate
and demand full payment of the promissory notes or to foreclose the mortgages.
GreenState applied the payment to the outstanding debt of Property Holders.
GreenState filed a motion for summary judgment, asking that it be permitted
to foreclose the mortgages. Property Holders resisted the motion, claiming there
was a genuine issue of material fact on the affirmative defense of waiver. Davisson
submitted an affidavit stating that he worked with a loan officer at GreenState who
subsequently left to take a position with a different credit union and Davisson was
in the process of refinancing the loans at this different credit union. Davisson
claimed that GreenState continued to accept his loan payments and all of the loans
with GreenState were made current by his payments in July.
GreenState responded that once a debt is accelerated, only payment of the
entire amount due can cure the default. It stated that its acceptance of payments
by Property Holders reduced the amount of the debt but should not be considered
a waiver of its right to foreclosure. GreenState also noted that under the terms of
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the business loan agreement, only a written waiver would be effective. Property
Holders resisted GreenState’s response.
On December 22, the district court granted the motion for summary
judgment. The court ruled:
In the present case, the Court finds that Plaintiff exercised the
acceleration clause by sending Defendants a notice to cure on
November 19, 2019, and a subsequent notice of acceleration on
December 16, 2019, after Defendants failed to cure the default. At
that time, the balance became accelerated, and the entire balance
was due to cure the default. The Court finds that any payment made
and accepted after the balance was accelerated only served to
reduce the total balance owed to Plaintiff on the note and does not
constitute a waiver. Defendants’ argument that Plaintiff accepted full
payments and waived the acceleration clause, therefore, fails.
Plaintiff accepted payment to which they were entitled. The Court
further does not find that Plaintiff acted in bad faith in pursuing
foreclosure and an emergency receiver. In viewing the facts in a light
most favorable to Defendants, it is undisputed that Plaintiff exercised
the acceleration clause and is entitled to judgment as a matter of law.
Summary judgment is appropriate.
Costs for the action were assessed to Property Holders. The court entered a
foreclosure decree.
Property Holders filed a motion pursuant to Iowa Rule of Civil Procedure
1.904(2), asserting the court did not correctly calculate the amount due on the
mortgages, as it had continued to make payments. Property Holders also resisted
the award of attorney fees to GreenState. The court determined the amount due
on the mortgages should be recalculated. The court found the amount GreenState
requested for attorney fees was reasonable. Property Holders was ordered to pay
$20,646.50 for GreenState’s attorney fees. Property Holders appeals the district
court’s decision.
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II. Standard of Review
We review a district court’s decision granting summary judgment for the
correction of errors of law. Jones v. Univ. of Iowa, 836 N.W.2d 127, 139 (Iowa
2013). The Iowa Supreme Court has stated:
A court should grant summary judgment if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue
as to any material fact and that the moving party is entitled to a
judgment as a matter of law. In other words, summary judgment is
appropriate if the record reveals a conflict only concerns the legal
consequences of undisputed facts. When reviewing a court’s
decision to grant summary judgment, we examine the record in the
light most favorable to the nonmoving party and we draw all
legitimate inferences the evidence bears in order to establish the
existence of questions of fact.
Id. at 139–40 (quoting Pitts v. Farm Bureau Life Ins. Co., 818 N.W.2d 91, 96–97
(Iowa 2012)). The party seeking summary judgment has the burden to show there
are no genuine issues of material fact and the party is entitled to a judgment as a
matter of law. Morris v. Steffes Grp., Inc., 924 N.W.2d 491, 496 (Iowa 2019).
III. Waiver
Property Holders contends that by continuing to accept payments
GreenState waived its ability to foreclose on the mortgages. It asserts that
GreenState accepted the payments over a period of time and applied the
payments to its outstanding debts. Property Holders claims there was a waiver of
acceleration of the debts by GreenState based on its acceptance of the late
payments.
A useful authority states:
The option to accelerate the debt upon default is a waivable right, as
is any contract right. Failure to exercise the option or acceptance of
late payment of the amount due will constitute waiver. Conversely,
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payment of an amount less than the full amount due does not
constitute waiver per se, as “[t]he mortgagee cannot be penalized for
the mere receipt of that to which he is in equity and good conscience
entitled.” Acceptance of the partial payment, then, typically will
merely reduce the balance due on the mortgage.
Waiver may be established by evidence of a course of dealing
between the parties. Thus, a lender who regularly accepts late
payments waives the right to accelerate the debt for a subsequent
late payment. Similarly, evidence that a lender had “abundant
opportunity” to demand payment but refrained from doing so may be
used in attempting to show waiver. Once a waiver has been
established, the lender must notify the borrower if it intends to
withdraw the waiver and strictly enforce the terms of the mortgage.
17 David M. Erickson & Christopher Talcott, Iowa Prac. Series: Real Estate Law &
Practice § 3:5 (Nov. 2021 update) (footnotes omitted).
When a mortgage contains an acceleration clause, the lender may waive
the right to acceleration. Collins v. Nagel, 203 N.W. 702, 704 (Iowa 1925); Farmers
& Merchants’ Bank v. Daiker, 133 N.W. 705, 705 (Iowa 1911). “Waiver is the
voluntary and intentional waiver of a known right.” Babb’s, Inc. v. Babb, 169
N.W.2d 211, 213 (Iowa 1969). “It is largely a matter of intent which may be
ascertained from a person’s conduct.” Id. A lender may waive the time for
payment of a debt. See Gottschalk v. Simpson, 422 N.W.2d 181, 184 (Iowa 1988).
The Iowa Supreme Court has stated:
[I]n no case has it been held that the acceptance of a payment of
less than the total amount of interest, per se, constituted a waiver of
the right to foreclose. The mortgagee cannot be penalized for the
mere receipt of that to which he is in equity and good conscience
entitled.
Jewell v. Logsdon, 206 N.W. 136, 138 (Iowa 1925); see also Babb’s, 169 N.W.2d
at 214 (“One can accept partial payments of a real estate mortgage obligation quite
consistently with foreclosure. Such payments merely reduce the balance due the
mortgagee.”).
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A party may waive its contractual rights by a course of dealing, such as the
acceptance of late payments over a period of time. See Dunn v. Gen. Equities of
Iowa, Ltd., 319 N.W.2d 515, 517 (Iowa 1982) (“Consequently we hold that the
holder of an installment note who has engaged in a course of dealing of accepting
late payments waives the right to accelerate the obligation upon a subsequent late
payment unless the holder has notified the obligor that future late payments will
not be accepted.”); see also Malott Bevard Props., L.C., No. 19-0381, 2020 WL
4200834, at *5 (Iowa Ct. App. July 22, 2020) (“When a lender regularly accepts
late payments . . . it constructively waives the right to accelerate the debt unless
and until it serves the borrower a notice of its intention to strictly enforce the terms
of the mortgage.”); ABN AMRO Mortg. Grp., Inc. v. Tullar, No. 06-0824, 2009 WL
1066511, at *6 (Iowa Ct. App. Apr. 22, 2009) (“We recognize that continued
acceptance of late payments can result in a waiver, requiring the creditor to give
notice to the debtor before using a future late payment as grounds for
acceleration.”).
In this case, GreenState informed Property Holders on December 16, 2019,
that the outstanding debt was accelerated and was due within fourteen days.
Property Holders did not timely pay the accelerated balance.
Because acceleration provisions are not self-executing, the relative
timing of an attempted cure and the affirmative act of accelerating
the debt is important. Before the debt has been accelerated, the
borrower need only make payment on portions of the debt then due
in order to cure. However, because acceleration has the effect of
calling the full amount of the debt plus all interest immediately due,
after the lender acts to accelerate the borrower may only cure by
tendering the full amount.
17 Iowa Prac. Series: Real Estate Law & Practice, § 3:5 (footnote omitted).
8
After GreenState accelerated the loan, Property Holders could only cure the
default by paying the full amount due. See id. Property Holders did not pay the
full amount due. It paid only the amount that would have made the debt current if
GreenState had not accelerated the loan. GreenState’s acceptance of payments
of less than the total amount due did not constitute a waiver of the right to foreclose.
See Jewell, 206 N.W. at 138. “The mortgagee cannot be penalized for the mere
receipt of that to which he is in equity and good conscience entitled.” Id. Property
Holders has not shown GreenState waived its ability to foreclose on the mortgages
by continuing to accept payments.
IV. Attorney Fees
A. Property Holders contends the district court abused its discretion in
awarding attorney fees to GreenState. In the motion for summary judgment,
GreenState asked for $21,096.50 in attorney fees.3 Property Holders asked the
court to set a hearing to determine “what attorney fees, if any,” GreenState should
be awarded. GreenState replied that the request for a hearing on attorney fees
should be denied, “on the basis the amount of attorney fees requested are, on their
face, reasonable under the circumstances.”
The district court’s ruling on the motion for summary judgment did not
specifically address the issue of attorney fees, stating only that costs were
3 In EQCV094983, GreenState requested attorney fees of $2613.00. In
EQCV094985, GreenState requested attorney fees of $2503.00. In EQCV095003,
GreenState requested attorney fees of $2503.00. In EQCV095004, GreenState
requested attorney fees of $3053.00. In EQCV095008, GreenState requested
attorney fees of $2778.00. In EQCV095015, GreenState requested attorney fees
of $2640.50. In EQCV095024, GreenState requested attorney fees of $2503.00.
In EQCV095025, GreenState requested attorney fees of $2503.00. In total,
GreenState requested attorney fees of $21,096.50.
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assessed to Property Holders. The decree of foreclosure, however, ordered
Property Holders to pay $20,646.50 for GreenState’s attorney fees.4
In a motion pursuant to Iowa Rule of Civil Procedure 1.904(2), Property
Holders again asked for a hearing on the issue of attorney fees. The district court
ruled:
In considering the factors necessary to reach a determination
regarding the reasonableness of the attorney fee request in this
case, the Court finds nothing unreasonable about the time spent or
amount requested by [GreenState’s] counsel on this case. The Court
has reviewed [GreenState’s] attorney fee affidavit, and in sum, when
the whole picture is viewed, and applying the Court’s independent
judgment with the benefit of hindsight, the Court finds that it is the
experience of the Court that the amount requested for attorney fees
in this case is a typical amount for a normal foreclosure action. The
Court finds that the amount requested is appropriate. The fees
sought by [GreenState] are reasonable, and [the] request for a
hearing regarding the matter is denied.
Property Holders appealed the district court’s ruling.
Iowa Code section 625.22 (2020) provides, “When judgment is recovered
upon a written contract containing an agreement to pay an attorney fee, the court
shall allow and tax as a part of the costs a reasonable attorney fee to be
determined by the court.” The amount of attorney fees that can be awarded is
limited to those fees that are reasonable. NCJC, Inc. v. WMG, L.C., 960 N.W.2d
58, 67 (Iowa 2021). We review an award of attorney fees for an abuse of
discretion. GreatAmerica Leasing Corp. v. Cool Comfort Air Conditioning &
Refrigeration, Inc., 691 N.W.2d 730, 732 (Iowa 2005). “Reversal is warranted only
4 In EQCV095003, GreenState requested $2503.00 in attorney fees but the district
court awarded $2053.00. GreenState requested a total of $21,096.50 in attorney
fees but because of the reduced award in EQCV095003, it was awarded
$20,646.50.
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when the court rests its discretionary ruling on grounds that are clearly
unreasonable or untenable.” Gabelmann v. NFO, Inc., 606 N.W.2d 339, 342 (Iowa
2000).
The district court considered the amount of attorney fees requested and
found “that the amount requested for attorney fees in this case is a typical amount
for a normal foreclosure action.” The court made this ruling based on its
experience in other foreclosure actions. The court appropriately considered
whether the requested attorney fees were reasonable. See Iowa Code § 625.22;
NCJC, 960 N.W.2d at 67. We conclude the district court did not abuse its
discretion by ruling Property Holders should pay $20,646.50 for GreenState’s
attorney fees.
B. GreenState also seeks attorney fees for this appeal. Where attorney
fees are awarded under section 625.22, a party may also be awarded appellate
attorney fees. Bankers Tr. v. Woltz, 326 N.W.2d 274, 278 (Iowa 1982). “[T]he
issue of appellate attorney fees is ‘frequently determined in the first instance in the
district court because of the necessity for making a record.’” Schaffer v. Frank
Moyer Constr., Inc., 628 N.W.2d 11, 23 (Iowa 2001) (quoting Lehigh Clay Prods.,
Ltd. v. Iowa Dep’t of Transp., 545 N.W.2d 526, 530 n.2 (Iowa 1996)). In general,
“[w]e prefer that the district court determine the reasonable amount of attorney fees
plaintiffs should be awarded on this appeal.” Bankers Tr., 326 N.W.2d at 278.
Therefore, we remand the case to the district court to determine the reasonable
amount of appellate attorney fees. See Iowa Code § 625.22.
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We affirm the decision of the district court and remand for an award of
appellate attorney fees.
AFFIRMED AND REMANDED.