IN THE COURT OF APPEALS OF IOWA
No. 17-0513
Filed July 18, 2018
U.S. BANK NATIONAL ASSOCIATION,
Plaintiff-Appellant,
vs.
MICHAEL PARROTT, HEIRS OF DOLORES MARIE LISK, ERIC LISK,
UNKNOWN HEIRS OF DOLORES MARIE LISK, CREDITORS OF DOLORES
MARIE LISK, STATE OF IOWA, and PARTIES IN POSSESSION,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Scott County, Mark J. Smith, Judge.
In an interlocutory appeal, plaintiff challenges the district court decision
denying its motion for a default judgment in a foreclosure action. REVERSED AND
REMANDED.
Donald J. Pavelka Jr. of Locher Pavelka Dostal Braddy & Hammes, L.L.C.,
Council Bluffs, for appellant.
Thomas J. Miller, Attorney General, and Donald D. Stanley, Jr. and Laura
A. Steffensmeier, Assistant Attorneys General, for appellee State.
Eric Lisk, Wilson, appellee pro se.
Michael Parrott, appellee pro se.
Considered by Vogel, P.J., Bower, J., and Mahan, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2018).
BOWER, Judge.
2
In an interlocutory appeal, U.S. Bank National Association (U.S. Bank)
challenges the district court decision denying its motion for a default judgment in a
foreclosure action where the mortgagor is deceased. We find U.S. Bank
adequately provided notice to those with an interest in the foreclosure proceedings.
We conclude the district court abused its discretion in denying U.S. Bank’s motion
for a default judgment.
I. Background Facts & Proceedings
On April 24, 2015, Dolores Lisk obtained a loan of $58,500 from U.S. Bank.
The loan was secured by a mortgage on real estate she owned in Davenport. Lisk
died on January 28, 2016. An estate was not opened after her death. The loan
went into default.
On September 22, 2016, U.S. Bank filed a petition seeking foreclosure of
the mortgage without redemption, under Iowa Code section 654.20 (2016), and
waived its right to a deficiency judgment. The petition named as defendants Lisk’s
sons Michael Parrott and Eric Lisk, unknown heirs of Lisk, creditors of Lisk, and
“all persons known and unknown claiming any right, title, or interest and all of their
heirs, spouses, assigns, grantees, legatees, devisees, and all beneficiaries of each
and all the above-named defendants.”1 U.S. Bank mailed notice to Lisk’s two sons.
The district court entered an order permitting service by publication for the
unknown defendants. U.S. Bank placed an official notice of the foreclosure action
1
The notice additionally named the Internal Revenue Service (IRS). The IRS consented
to the foreclosure and asked to be dismissed from the case. The district court granted the
request for dismissal. The Iowa Department of Revenue and the State of Iowa also
consented to the foreclosure.
3
in the Quad-City Times on three occasions. The property which was the subject
of the foreclosure was vacant.
On November 1, U.S. Bank gave notice of its intent to file a written
application for default. No defendants responded to the foreclosure petition or the
notice of intent to seek a default judgment. U.S. Bank filed an application for
default judgment on January 4, 2017. The district court denied the motion, finding
an estate should be opened to determine the real parties in interest concerning the
property in question. The court also stated, “Plaintiff has provided no authority to
support its methods.”
U.S. Bank filed a motion to reconsider, stating it relied upon Iowa Title
Standard 7.8. It noted Lisk’s obituary stated she was survived by two sons and
other relatives, and the sons had been given notice of the foreclosure proceedings.
Additionally, the bank pointed out it was seeking an in rem judgment against the
real estate. The district court denied the motion to reconsider. The court stated,
“In order to quiet title and grant Plaintiff’s motion, the Court would need to make
findings that the defendants are the real parties in interest.” Also, “This Court
cannot make a finding that it has jurisdiction over persons with an interest because
this court does not know the identity of the persons with an interest in the estate of
a deceased borrower because no estate has been opened in probate to identify
said persons.” The court concluded, “Opening a creditor’s estate would solve
these problems.”
4
U.S. Bank filed an application for an interlocutory appeal.2 The Iowa
Supreme Court granted the application. The case was subsequently transferred
to the Iowa Court of Appeals.
II. Standard of Review
This action was brought in equity, and our review is therefore de novo. See
Iowa R. App. P. 6.907. “A decision to grant or deny a motion for default judgment
rests in the sound discretion of the trial court.” Jack v. P & A Farms, Ltd., 822
N.W.2d 511, 515 (Iowa 2012) (quoting Wilson v. Liberty Mut. Grp., 666 N.W.2d
163, 165 (Iowa 2003)). We will reverse the district court’s decision on a motion for
default judgment only when the court has abused its discretion. Id.
III. Default Judgment
U.S. Bank claims the district court abused its discretion by denying their
motion for default judgment. They state it should not be necessary to open an
estate for the property interests of unknown heirs because the foreclosure action
is in rem, so its action is against the property, not individual defendants. U.S. Bank
states it served notice to the known interested parties by mail and unknown
interested parties by publication, which it states is the same as it would be required
to do for a probate estate. It claims opening an estate would not provide greater
protection for any unknown heirs.
A foreclosure action is final and cannot be collaterally attacked unless the
court lacked jurisdiction. See Kriv v. Nw. Sec. Co., 24 N.W.2d 751, 755 (Iowa 1946
(“The order may be attacked collaterally only if it was entered without jurisdiction.”).
2
No appellees are participating in the appeal. The Iowa Supreme Court determined the
listed appellees are still parties to the appeal.
5
A foreclosure proceeding will cut off the rights of all persons made a party to the
foreclosure proceedings. See Teachout v. Duffus, 119 N.W. 983, 983 (Iowa 1909)
(noting the rights of entities not made a party to the foreclosure proceedings were
not cut off).
At the time of the district court’s order, U.S. Bank knew of no estate having
been opened for Lisk in Iowa or any other state. Accordingly, U.S. Bank made
Lisk’s known and unknown heirs parties to the foreclosure petition, and it provided
notice to them as directed in the rules of civil procedure. See Iowa Rs. Civ. P.
1.311 (allowing notice by ordinary mail to known defendants), 1.312 (allowing
notice against unknown parties to “be directed to the unknown claimants of the
property involved”). U.S. Bank also published notice of foreclosure for persons
“whose identity is not reasonably ascertainable,” as required in section 654.4A(5).
By doing so, the foreclosure proceeding should be able to extinguish the claims of
all known and unknown heirs, and the purchaser in the sheriff’s sale will be able to
obtain a clear title. See Iowa Code § 654.5(1)(c).
In discussing the Iowa Land Title Standards, our supreme court has
instructed us “to give serious consideration to these standards.” Tesdell v. Hanes,
82 N.W.2d 119, 124 (Iowa 1957). On the question, “What showing is needed
where a mortgage granted by a now deceased borrower is foreclosed on in rem,”
Standard 7.8(1) states:
If a foreclosure court had in rem jurisdiction of the persons
with an interest in the estate of a deceased borrower, and entered a
decree of foreclosure, there is generally no need to open an estate
for the deceased borrower. Under the doctrine of res judicata, a title
problem can only arise in such a case if a person in interest objects
to the procedure in the foreclosure case and the court upholds the
objection.
6
Also, under Standard 7.8(4), if there is no estate, “the foreclosure should
name as defendants all known persons who are reasonably believed to have a
right to inherit the property, and also all unknown persons with an interest in the
estate.” U.S. Bank followed this standard by naming all known and unknown
persons reasonably believed to have an interest in the property. Even if U.S. Bank
were forced to open an estate, the administrator would notify the known and
unknown heirs of the decedent in the same manner, giving no greater notice than
U.S. Bank has already provided. See Iowa Code § 633.230(1) (requiring notice of
an intestate estate by mail to known interested parties and notice by publication to
unknown interested parties).
We find the district court abused its discretion in denying U.S. Bank’s motion
for a default judgment. U.S. Bank adequately provided notice to those with an
interest in the foreclosure proceedings. We reverse the district court’s decision
and remand for further proceedings.
REVERSED AND REMANDED.