REGIONS BANK, Plaintiff-Appellant, vs. CITY STATE BANK, Defendant-Appellee.
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IN THE COURT OF APPEALS OF IOWA
No. 9-720 / 09-0321
Filed December 30, 2009
REGIONS BANK,
Plaintiff-Appellant,
vs.
CITY STATE BANK,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Artis I. Reis, Judge.
Plaintiff appeals from the district court‟s ruling granting the defendant‟s
motion for summary judgment. REVERSED AND REMANDED.
Thomas H. Burke and Jonathan Kramer of Whitfield & Eddy, P.L.C., Des
Moines, for appellant.
Thomas L. Flynn, Margaret C. Callahan, and Matthew C. McDermott of
Belin McCormick, P.C., Des Moines, for appellee.
Considered by Sackett, C.J., and Vaitheswaran and Danilson, JJ.
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SACKETT, C.J.
Plaintiff, Regions Bank appeals from the district court ruling granting a
motion for summary judgment in favor of defendant, City State Bank. Regions
Bank contends the district court erred in (1) failing to grant its request for a
continuance to conduct discovery prior to the summary judgment hearing, (2)
finding that City State‟s notice of cancellation complied with the requirements of
Iowa Code section 654.18 (2007), and (3) failing to consider whether other
contractual agreements affected statutory foreclosure and redemption rights. We
find the district court abused its discretion in denying Regions Bank‟s request for
a continuance and remand for further proceedings.
I.
BACKGROUND AND PROCEEDINGS.
Kennybrook Development
Company, L.C. borrowed funds from City State to purchase approximately 117
acres in Grimes, Iowa.
The property was collateral for the mortgage.
Kennybrook then borrowed additional funds in the form of two mortgages from
Regions Bank to use in building a mixed use development on the property.
Certain platted lots on the property served as collateral for these mortgages.
According to Regions Bank, a portion of the funds advanced were also to be
used toward the purchase price of the land.
In an agreement between
Kennybrook and City State, some of the funds loaned from Regions Bank were
to be paid to City State in exchange for a partial release of certain lots from City
State‟s mortgage. Regions Bank contends it was a third party beneficiary to this
agreement, that partial releases were a standard practice of City State, and that it
relied on the partial release agreement in deciding to loan Kennybrook funds.
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Kennybrook defaulted on the mortgage to City State.
City State, the
senior lienholder, initiated proceedings under Iowa Code section 654.18 to
arrange an alternative nonjudicial voluntary foreclosure. City State sent notice to
Kennybrook informing it of Kennybrook‟s right to cancel the voluntary foreclosure
agreement, as required by Iowa Code section 654.18. City State also sent a
notice to Regions Bank, as required by Iowa Code sections 654.18 and 628.29,
informing it that Regions Bank had a right to redeem the property as a junior
lienholder.
Regions Bank informed City State that it wanted to redeem one
specific lot of the property and offered to pay the release price1 to City State for
the lot. Regions Bank claimed City State was obligated to accept this money for
the lot due to a separate agreement between Kennybrook and City State. City
State refused the offer.
On August 22, 2008, Regions Bank filed a petition seeking a declaratory
judgment that the voluntary foreclosure was void because City State failed to
provide proper notice under Iowa Code section 654.18 and interfered with
Regions Bank‟s right of redemption. It also alleged the foreclosure should be set
aside as inequitable. City State filed a motion for summary judgment. Regions
Bank resisted the motion and filed a conditional motion for summary judgment on
its claim that City State had been unjustly enriched. The matter came on for
hearing on December 10, 2008. The court granted City‟s State‟s motion, finding
it complied fully with the statute and the foreclosure was not void. The court
denied Regions Bank‟s motion for summary judgment on its unjust enrichment
1
The release price is listed at two different prices in various places in the record. It is
stated as $35,000 in some places in the record, and as $42,000 in others.
4
claim but clarified that the ruling “shall not prejudice Regions from pursuing a
separate action based on the third party beneficiary or unjust enrichment claims it
has advanced in this action.” On appeal, Regions Bank asserts the district court
should have granted it a continuance to conduct further discovery and erred in
concluding that other agreements cannot modify the requirements of section
654.18 and that proper notice was given under the statute.
II. ERROR PRESERVATION AND STANDARD OF REVIEW. City State
first argues Regions Bank has not preserved error on its claim that the court
should have granted Regions Bank a continuance to conduct further discovery.
Regions Bank requested a continuance within its resistance and motion for
summary judgment. The district court implicitly addressed the issue in its ruling.
It rejected Regions Bank‟s request finding that even if the additional evidence
was obtained through discovery, it would not affect the outcome of the summary
judgment proceeding. Error was therefore preserved.
We review a court‟s ruling on a motion for continuance made pursuant to
rule 1.981(6) for an abuse of discretion. Kulish v. Ellsworth, 566 N.W.2d 885,
889 (Iowa 1997).
An abuse of discretion occurs when it is exercised “„on
grounds or for reasons clearly untenable or to an extent clearly unreasonable.‟”
Id. (quoting Vaughan v. Must, Inc., 542 N.W.2d 533, 543 (Iowa 1996)). Even
under an abuse of discretion review, we will correct erroneous applications of
law. Everly v. Knoxville Cmty. Sch. Dist., 774 N.W.2d 488, 492 (Iowa 2009).
III.
REQUEST FOR CONTINUANCE.
1.981(6) provides:
Iowa Rule of Civil Procedure
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Should it appear from the affidavits of a party opposing the motion
that the party for reasons stated cannot present by affidavit facts
essential to justify the opposition, the court may refuse the
application for judgment or may order a continuance to permit
affidavits to be obtained or depositions to be taken or discovery to
be had or may make such other order as is just.
This rule is designed for a party who “legitimately needs additional time to gather
facts essential to justify its opposition when faced by a summary judgment
motion.” Bitner v. Ottumwa Cmty. Sch. Dist., 549 N.W.2d 295, 301 (Iowa 1996).
All discovery need not be completed prior to ruling on a motion for summary
judgment but generally, a nonmoving party should have the opportunity to make
discovery before the hearing and ruling on the motion. Id. at 302. In order to be
entitled to a continuance, the party must substantially comply with the rule‟s
requirements of providing, by affidavit, reasons why facts essential to a
resistance cannot be presented, and what additional factual information is
necessary. Id. at 301.
To support the request for continuance, Regions Bank‟s attorney
submitted an affidavit stating that the bank required additional time for discovery
to produce evidence of the release agreement. The attorney stated he had not
had the opportunity to depose a representative from City State. He also noted
that he had sent a request for production of documents to City State, but that City
State‟s response to the request was due the same day that Regions Bank had to
file its resistance. The district court below determined that more discovery was
unnecessary stating:
Even if Regions had produced a witness affidavit or other
competent evidence supporting the existence of a release
agreement between City State and Regions, summary judgment on
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the issue of the foreclosure would still be warranted, as City State
has plainly complied with the terms of § 654.18.
We disagree with this finding. We cannot foretell what effect, if any, a
release agreement would have on the foreclosure process without examining its
terms.
Furthermore, Regions Bank‟s affidavit in support of its request for
continuance substantially complies with the requirements of rule 1.981(6).
It
asserted that Regions Bank, as of the date of the hearing, had not been able to
depose witnesses needed to verify the existence of the release agreement, that
the defendant had not responded to discovery requests, and that the release
agreement was necessary to resist the motion. The district court abused its
discretion in failing to grant Regions Bank‟s request for a continuance. Since
Regions Bank is entitled to more time to conduct discovery before a hearing on
summary judgment, we need not address the other arguments. We reverse the
district court‟s ruling denying the bank‟s request for continuance and remand for
further proceedings. We do not retain jurisdiction.
REVERSED AND REMANDED.
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