Upon the Petition of EDWARD CEILLEY ESTATE, Plaintiff-Appellant, vs. RICHARD A. ANDERSEN, MERCY T. ANDERSEN and RICHARD LEE, Defendants-Appellees.
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IN THE COURT OF APPEALS OF IOWA
No. 9-661 / 09-0357
Filed September 2, 2009
Upon the Petition of
EDWARD CEILLEY ESTATE,
Plaintiff-Appellant,
vs.
RICHARD A. ANDERSEN, MERCY
T. ANDERSEN and RICHARD LEE,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Black Hawk County, Kellyann M.
Lekar, Judge.
The Executor of the Edward Ceilley Estate appeals from the district court’s
denial of its forcible entry and detainer action. REVERSED AND REMANDED.
Joseph R. Sevcik of Snow, Knock, Sevcik & Hinze, Cedar Falls, for
appellant.
Bradley M. Strouse of Redfern, Mason, Larsen & Moore, P.L.C., Cedar
Falls, for appellees.
Considered by Vogel, P.J., and Potterfield, J., and Miller, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2009).
2
POTTERFIELD, J.
The Executor of the Edward Ceilley Estate and Yvonne Ceilley personally
(referred to as the Estate in our opinion) appeal the district court’s denial of its
petition for forcible entry and detainer.
The district court found for the
defendants, Richard and Mercy Andersen,1 on their asserted defenses that the
notice of forfeiture of the real estate sales contract was fatally defective and that
the equities weighed in their favor. We reverse and remand.
I. Background Facts and Proceedings.
The following facts are not in dispute. In 2001, the defendants, Richard
and Mercy Andersen, entered into a sales contract with Edward and Yvonne
Ceilley for the purchase of commercial real estate. Monthly payments in the
amount of $1042.64 were due on the first of each month. The Andersens made
timely payments only for the first two months—payments thereafter were late.
The Andersens also failed to pay real estate taxes in September 2004 and in
March and September 2007. Edward Ceilley dealt with these defaults informally.
Though entitled to interest for late payments under the contract, the Ceilleys did
not demand interest from the Andersens through 2007. The Ceilleys also paid
the property taxes.
Edward Ceilley died in January 2008.
The Andersens did not make
contract payments in January, February, and March of 2008. Yvonne, now the
executor of the Estate of Edward Ceilley, sought legal help on behalf of the
Estate and for her personal interest in the property. The Estate served notice of
forfeiture to the Andersens on March 1, 2008, listing as defaults the amounts due
1
The defendant Richard Lee has not appeared in any of the proceedings.
3
for contract payments, additional interest, and reimbursement of property taxes
paid by the Ceilleys. The notice stated that the contract “shall stand forfeited
unless the parties in default, within 30 days after completed service of this notice,
shall perform the terms and conditions in default, and in addition pay the
reasonable costs of serving this notice.” The Andersens cured the defaults.
The Andersens did not pay real estate taxes in March 2008 and were late
with the April 2008 payment on the contract. The Estate again served notice of
forfeiture. The Andersens cured the defaults.
On November 13, 2008, the Estate served notice of forfeiture for
nonpayment of the November 1, 2008 contract payment. The Andersens cured
the default. After each of these three notices of forfeiture, the Andersens cured
the default by payment on the last day of the time period for doing so. After each
notice of forfeiture and each payment curing the default, the Andersens then
were late in their payment for the following month.
After curing the November 2008 default and notice of forfeiture, the
Andersens did not timely pay the December 2008 contract payment.
On
December 11, 2008, the Estate served a fourth notice of forfeiture stating the
sales contract had not been complied with in the following particulars:
a. Non-payment of December 1, 2008, contract payment
b. Cost of Service
Total
$1042.64
$45.00
$1187.64
On Wednesday, January 14, 2009, after the 30-day time limit for curing
the default expired, Mr. Andersen delivered a check in the amount of $1087.64 to
counsel for the Estate. Counsel refused to accept the check.
4
On January 16, 2009, the Andersens were served with notice to quit,
stating “the contract for the purchase of the real estate was forfeited on January
13, 2009.”
On January 29, 2009, the Estate filed this action for forcible entry and
detainer. Trial was held on February 4, 2009. The Andersens had not paid the
January or February installment.
At trial, the Andersens did not contest that they were in default on the
sales contract. Mr. Andersen testified that the property was leased to a tenant,
who operated a restaurant on the premises. The tenant was in arrears on rent
for various reasons. With respect to the check for $1087.64 he attempted to
deliver on Wednesday, January 14, Mr. Andersen testified he “got sidetracked
from the deadline.” Mr. Andersen testified he had given to his own attorney a
cashier’s check for the January 2009 payment and that he had in his possession
a cashier’s check for the February 2009 payment.
The district court entered a ruling denying the forcible entry and detainer.
The court found the notice of forfeiture “contained a typographical error for the
total in default” though the “individual items listed as being in default were
correctly stated.” The court found that the Andersens “have a history of making
late payments on the real estate contract . . . however, the Defendants have
always cured the forfeiture prior to the necessary date.” The court wrote:
This Court has seriously considered this matter from every
angle. The Court could make an argument on behalf of either side
which would support a judgment in this matter. On the one hand,
the Notice of Forfeiture is defective from the standpoint of the total
amount stated as being in default but it is not inaccurate as to the
itemized amounts of default. The Notice of Forfeiture was validly
served and [the Andersens] appear to have been aware of the
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inaccuracy in the Notice of Forfeiture as the amount tendered by
the [Andersens] was for the correct amount and not the incorrect
amount stated in the Notice of Forfeiture. However, other than the
amounts in default, there are no independent grounds stated in the
Notice of Forfeiture which would allow the forfeiture to proceed.
The Notice of Forfeiture is defective in that it incorrectly states the
amount in default. Further, there are equitable reasons on the
[Andersens’] behalf which support denying this forfeiture and
forcible entry and detainer proceeding. As the [Andersens] have
cited, the law does not favor forfeiture.
The Estate appeals, contending the court erred in determining the notice
of forfeiture was fatally defective and in granting equitable relief to the defendants
under the circumstances presented.
II. Scope and Standard of Review.
Because an action for forcible entry and detainer is triable in equity, our
review is de novo. Powell v. Grewing, 562 N.W.2d 761, 762 (Iowa 1997). “We
are obliged to consider both the facts and the law and then determine—based on
the credible evidence—rights anew on those propositions properly presented.”
Id. (citation omitted).
III. Analysis.
Under Iowa law, “a contract for the purchase of real estate works an
equitable conversion. The contract vendee becomes the equitable owner; the
contract vendor holds title as trustee for his purchaser.” Fellmer v. Gruber, 261
N.W.2d 173, 174 (Iowa 1978). When a notice of forfeiture has been served on
the contract vendee, the rights of the contract vendor are identical to those
before service of the notice of forfeiture. See generally Jensen v. Schreck, 275
N.W.2d 374, 384 (Iowa 1979) (noting that “[t]he purpose of this chapter is to limit
the rights of a forfeiting vendor who might otherwise summarily remove a vendee
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upon default” and not to grant any additional power to the vendor). A forfeiture
for nonperformance cannot be declared until the cure period has run. See Allen
v. Adams, 162 Iowa 300, 303, 143 N.W. 1092, 1093 (1913).
In Iowa, forfeiture is completed by compliance with Chapter 656 and the
passage of thirty days after service of notice. Iowa Code §§ 656.2, .4 (2009);
Gottschalk v. Simpson, 422 N.W.2d 181, 184 (Iowa 1988).
The statute is
“designed to extend a little grace to a party in default who may be staggering
under the load of his undertaking.” Hampton Farmers Co-op. Co. v. Fehd, 257
Iowa 555, 560, 133 N.W.2d 872, 875 (1965) (quoting Waters v. Pearson, 163
Iowa 391, 397, 144 N.W. 1026, 1029 (1914)).
The notice of forfeiture states on its face that the “contract shall stand
forfeited unless the parties in default, within 30 days . . . perform.” (Emphasis
added.)
Ordinarily, nothing is required to complete a forfeiture except the
passage of the thirty days after notice. See Iowa Code §§ 656.2, .4. Once the
debtor has not cured within the prescribed cure period, the contract stands
forfeited. Hunt Hardware Co. v. Herzoff, 196 Iowa 715, 718, 195 N.W. 264, 265
(1923). The conclusion that “the contract stands forfeited,” necessarily implies
that the state of the title is “the same as though no contract for a deed had ever
been entered into.” Id.
Iowa courts follow the general rule that equity abhors forfeiture. Jamison
v. Knosby, 423 N.W.2d 2, 4 (Iowa 1988). “In adherence to that rule, forfeiture
statutes are to be construed strictly against forfeiture, with the burden to show full
and strict compliance with the statutory procedures upon the party seeking
forfeiture.” Id. at 5; see also Lett v. Grummer, 300 N.W.2d 147, 149 (Iowa 1981)
7
(noting that “under statutory forfeiture, and we must enforce the statute” reading
it “strictly as to the vendor”); see, e.g., Fairfax v. Oaks Dev. Co., 713 N.W.2d 704,
708 (Iowa 2006) (applying rule of strict compliance with statutory procedures, the
supreme court denied forfeiture where the party seeking forfeiture failed to serve
notice as required).
A. Inaccuracies in Notice of Forfeiture. Here, the notice of forfeiture stated
that the contract was in default for “Non-payment of December 1, 2008, contract
payment $1,042.64” and “Cost of Service $45.00.” The district court found and
the parties agree that the notice accurately listed “the itemized amounts of
default.” When the Andersens tendered a check, it was for the correct total of
these itemized amounts in default.
The amounts were totaled incorrectly,
however, and the district court concluded that the notice of forfeiture was “fatally
defective for failure to accurately state the amount in default.” This conclusion is
not supported by the statutory requirements or our case law.
Iowa Code section 656.2 provides, in part:
1. The forfeiture shall be initiated by the vendor by serving
on the vendee a written notice which shall:
a. Reasonably identify the contract by a document
reference number and accurately describe the real estate covered.
b. Specify the terms of the contract with which the vendee
has not complied.
c. State that unless, within thirty days after the completed
service of the notice, the vendee performs the terms in default and
pays the reasonable costs of serving the notice, the contract will be
forfeited.
The Andersens do not argue that the notice did not satisfy the statutory provision.
They contend instead that the Estate “failed to properly calculate the amount of
default.”
8
In Hampton Farmers Co-op., 257 Iowa at 558, 133 N.W.2d at 873, the
notice of forfeiture stated that the contract seller intended to accelerate all
payments upon the buyers’ default, and demanded the entire principal, not just
the late installment payment. The court held that, although the parties’ contract
provided for acceleration of payments, the demand for the full principal was not in
keeping with the purpose of the forfeiture statute. Id. at 559, 133 N.W.2d at 874.
It refused, however, to set aside the notice of forfeiture as a nullity based on the
excessive demand, and ruled that the notice was valid to the extent of the default
on the installment payment. Id. at 561, 133 N.W.2d at 875. The court noted that
prior case law established the rule that a notice of forfeiture will not be set aside
“if there is one specific matter in the notice which is sufficient to justify a
forfeiture.” Id. The court stated: “in event the notice of forfeiture makes demand
for more than that to which the plaintiff is entitled, such excessive demand will
not invalidate the forfeiture.” Id. at 563, 133 N.W.2d at 876 (citations omitted).
Here, the only error in the notice of forfeiture is the inaccurate total under
the correctly stated December contract payment and cost of service.
The
Andersens argue, and the district court apparently agreed, that where there is an
inaccuracy in the notice, Iowa case law requires that there must be an
“independent ground for default stated in the notice.” We do not read such a
requirement in the cases. All that is required is “one specific matter in the notice
which is sufficient to justify forfeiture.” Id. at 561, 133 N.W.2d at 875; see also
Gibson v. Thode, 209 Iowa 368, 371-72, 228 N.W. 91, 92 (1929) (holding that
where notice makes a demand on the vendees for payment of principal and
interest, vendees “were duly notified that at least the interest which was past due
9
had not been paid” and the “notice of forfeiture was good to that extent; hence
was a sufficient basis to support this forfeiture”); Votruba v. Hanke, 202 Iowa
658, 659, 210 N.W. 753, 753 (1926) (finding specification in the notice relating to
nonpayment of taxes was sufficiently specific to sustain forfeiture); Gaston v.
Horn, 158 Iowa 674, 678, 138 N.W. 925, 926 (1921) (upholding forfeiture though
the notice demanded $500 when only $185 was due).
Here, the notice correctly specified the nonpayment of the December
contract payment. The notice accurately stated the amount of the delinquent
payment.
The Andersens concede they were in default on the December
payment and tendered the correct total that needed to be paid. The fact that the
notice inaccurately totaled the monthly payment and the cost of service does not
render the notice a nullity. The district court erred in concluding the notice was
“fatally defective.”
B. Balancing of Equities.
The district court also concluded that the
equities weighed in favor of setting aside the forfeiture. Forfeitures are enforced
“only when it is shown that the equities clearly require forfeiture.” Babb’s Inc. v.
Babb, 169 N.W.2d 211, 213 (Iowa 1969). Our de novo review of this record does
not support a finding that the balance of equities tips in the Andersens’ favor.
Neither the amount in default nor the actions of the Andersens justifies setting
aside the forfeiture.
In Lett v. Grummer and in Watson v. Chapman, the Iowa Supreme Court
found equity would not allow forfeiture for defaults that were miniscule in amount.
Lett, 300 N.W.2d at 149 (noting claimed default was the failure to replace six
missing window panes in an obsolete hog house); Watson v. Chapman, 244
10
Iowa 56, 63, 55 N.W.2d 555, 559 (1952) (noting the only amount in default was
$2.07, the cost of serving notice). The courts found the forfeitures to be null and
void. Id. In Brown v. Nevins, 499 N.W.2d 736, 738-39 (Iowa Ct. App. 1993), this
court found that a default of the payment of a $40 fee for service of the notice of
forfeiture was “trifling” when compared with the debtor’s equity in the real estate
and set aside the forfeiture.
On the other hand, a forfeiture will be enforced, even for a small amount,
where the contract purchaser repeatedly missed contract payments and
defaulted in a “flagrant and stubbornly deliberate” manner.
Miller v. Am.
Wonderlands, Inc., 275 N.W.2d 399, 402-03 (Iowa 1979) (noting deficiency of
only $10.48). The Miller court wrote:
[W]e have taken some pains to point out that the fact forfeitures are
not favored does not mean they will never be enforced.
The amount of default in this case is trifling when compared
with the value of the real estate. On the other hand the default was
flagrant and, we must assume, stubbornly deliberate. If we were to
hold this trifling amount will not trigger a forfeiture we would in
effect be repealing the statute. Under such a rule trifling amounts
could never be recovered. We think that where the amount of a
default is only trifling, that is only one factor to be considered as a
part of equity’s abhorrence of forfeiture. The fact that the amount in
default here was trifling must be balanced against the showing that
the default was deliberate and that an opportunity was given to
make payment.
Id. (citations omitted) (emphasis added).
Even were we to assume—as the
Andersens imply—that the amount in default here is trifling,2 we must balance
the amount in default against the Andersens’ lengthy history of nonpayment and
2
We do not think the default amount here is “trifling” compared to those in other cases.
See Miller, 275 N.W.2d at 403 (noting amount in default was $10.48); Brown, 499
N.W.2d at 738-39 (noting amount in default was $40).
11
their failure to cure within the statutory thirty-day period in this last forfeiture
proceeding.
In ruling that the equities weighed in favor of the Andersens, the district
court twice stated that the Andersens had “attempted to tender not only the
correct amount in default but also the most recent payment on the real estate
contract by way of cashier’s check” on the “32nd day after service of Notice of
Forfeiture.”
The testimony does not support the court’s statement.
Service of the
notice of forfeiture was accomplished on December 11, 2008. The statutory
thirty-day grace period ran on Saturday, January 10, 2009 (twenty days remained
in December plus ten in January). Mr. Andersen did not attempt to deliver the
cashier’s check to cure the noticed default until Wednesday, January 14—four
days after the period to cure had run.3
Mr. Andersen’s testimony about his
tardiness was that he “got sidetracked from the deadline.”
In addition, Mr.
Andersen testified that the check for the January 2009 contract payment,4 which
was due on January 1, was delivered to his attorney—not the Estate’s attorney,
and that check is dated “01-19-09.”
Other reasons noted by the district court include “the Defendants have
paid approximately 50 percent of the contract price at this time” and “the
3
The district court and the Andersens appear to have assumed that because the period
ran on Saturday, they were entitled to extend the deadline for curing their default until
Monday. But see Iowa Code § 4.1(34) (“In computing time, the first day shall be
excluded and the last included, unless the last falls on Sunday, in which case the time
prescribed shall be extended so as to include the whole of the following Monday.”
(emphasis added)).
4
This was submitted as Defendants’ Exhibit C.
12
Defendants cite the circumstances surrounding the flooding in Iowa which
contributed to the delinquency of the payments.” Yet, we do not know what
remained of the contract price as no testimony was offered in that regard. 5 There
was testimony that ninety-one payments had been made—eighty-nine of which
had been made late. Of this history of late payments, the Andersens state “there
can be no dispute that any prior difficulties had been rectified until the present
matter arose.” We think, instead, that the prior difficulties continued unabated.
Even at the time the Andersens attempted to cure the December default, they
were in default on the January payment.
Nor is there substantial support for a finding that the “flooding in Iowa []
contributed to the delinquency of the payments.” Mr. Andersen did not testify
that the flooding contributed to the Andersens’ delinquency.
Mr. Andersen
testified that the tenant of the building was $1500 behind in payments to the
Andersens for 2007, the year before the flood.
Q. How about for 2008? A. 2008 we started out, everything
was current. And then I think it was February or March he fell off a
ladder, injured his shoulder, which didn’t allow him to work to his full
ability. And he made partial payments in February and March . . . .
Then as he healed we were current. We kept current, and
then in July was our last full payment and that kind of coincided
with the floods. And then following the flood the street in front of
the building became a construction area, so the blocks between
21st and 22nd were all tore up . . . .
On appeal, the Andersens claim that Mr. Andersen “was unable to tender
payment within 30 calendar days after the notice of forfeiture was served as a
result of internal errors within his bank and as a result of his inability to contact
5
The price and interest rate are shown on the contract, but the record does not contain
evidence of the balance.
13
attorney for [the Estate] during a weekend.” Again, these claims are without
support.
Finally, the Andersens note:
Mrs. Ceilley testified that she and her husband had an established
pattern of not enforcing strict deadlines and of allowing the
Andersens a several day grace period. Given the circumstances
which obstructed Mr. Andersen’s efforts to make payments prior to
Saturday, January 10, 2009, the Appellant’s well-established
history of allowing a few extra days to the Andersens in making
payment, granting a forfeiture in the present matter would be
inequitable.
Had this default occurred at the end of 2007, before Mr. Ceilley’s death,
the Ceilleys’ leniency might have given this court more pause.
However,
beginning in March 2008, the Estate established a different pattern and served
notice of forfeiture upon the Andersens again and again. The Andersens did
cure three of the 2008 defaults—always on the last day for doing so. But, they
were again in default for the December 2008 payment and received a notice of
forfeiture for that default.
They did not cure the default within the thirty-day
period after service of the notice of forfeiture.
As the court said in Beck v.
Trovato, 260 Iowa 693, 698, 150 N.W.2d 657, 659-60 (1967):
Defendant has again failed to provide for payment of rent.
She cannot rely on plaintiff’s prior forbearance. The first effort to
oust her was sufficient warning . . . . Plaintiff should not be
subjected to repeated rent collection difficulties and need not
continue her prior forbearance.
“While it is true . . . that equity abhors a forfeiture, . . . it does not abhor a
forfeiture enough to override established legal principles.” May v. Oakley, 407
N.W.2d 569, 572 (Iowa 1987).
14
We conclude the notice of forfeiture was not fatally defective and that the
Andersens cannot avoid the forcible entry and detainer on equitable grounds.
See Moore v. Elliott, 213 Iowa 374, 378, 239 N.W. 32, 34 (1931) (“Within the
thirty-day period after service of notice of forfeiture, she neither performed nor
tendered full performance of her obligation under the contract by which she
agreed to abide, and the record fails to disclose any sufficient excuse for her
failure.”). We therefore reverse and remand.
REVERSED AND REMANDED.
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