First American Bank and Greenstate Credit Union v. Cheryl Lynn Johnson

                   IN THE COURT OF APPEALS OF IOWA

                                  No. 19-2057
                           Filed September 23, 2020


FIRST AMERICAN BANK and
GREENSTATE CREDIT UNION,
     Plaintiffs-Appellees,

vs.

CHERYL LYNN JOHNSON, et al.,
     Defendant-Appellant.
________________________________________________________________


      Appeal from the Iowa District Court for Webster County, Gina C. Badding,

Judge.



      Cheryl Johnson appeals the dismissal of her abuse-of-process claim and

the award of a summary judgment to First American Bank on the mortgage note.

She also disputes the attorney fee award. AFFIRMED.



      Alexander V. Kornya of Iowa Legal Aid, Des Moines, for appellant.

      William B. Serangeli and William M. Reasoner of Dickinson, Mackaman,

Tyler, and Hagen, P.C., Des Moines, for appellee.



      Considered by Tabor, P.J., and May and Greer, JJ.
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GREER, Judge.

      After she defaulted on agreements to pay a mortgage debt, First American

Bank1 moved for summary judgment to collect the monies from Cheryl Johnson.

The district court ruled in favor of the bank and entered a foreclosure decree and

an attorney fee judgment against Johnson. Johnson raised claims of abuse of

legal process for the bank’s efforts to seek a conservatorship over her. She

appeals the dismissal of her counterclaim. She also argues she was not in default

of her agreement with the bank and it was error for the district court to grant the

bank’s summary judgment. Finally, Johnson disputes the attorney fee award as

unreasonable.

      First American argues that only the attorney fee question is properly before

us for consideration because the appeal on the issues resolved by summary

judgment is untimely. We proceed to our analysis of this dispute.

    I. Background Facts and Proceedings.

      In October 1990, Johnson purchased a home in Fort Dodge, Iowa, for

$36,000. At the time of these proceedings, Johnson lived in the home with a

disabled adult daughter. To finance the purchase, Johnson obtained a loan,

secured by a mortgage, from First American. But Johnson struggled to pay the

monthly payments on the obligation. Finally, in January 2012, First American filed




1 During the appeal, First American applied to substitute parties because
GreenState Credit Union bought certain assets and liabilities of First American and
now is the party in interest. For ease of understanding, given the filings in the
underlying case, we use the terms “First American” and “the bank” to reference the
banks’ interest in this appeal.
                                        3


a foreclosure action against Johnson because of her failure to make the monthly

mortgage payments. The foreclosure decree issued on April 9, 2012.

      In April 2013, Johnson negotiated a settlement agreement with the bank to

remain in the home. With that agreement finalized on April 30, 2013, Johnson

agreed to pay $19,803.91 in installments of $310 per month from June 1, 2013,

until May 1, 2016, with a final balloon payment of the unpaid principal balance,

which would become due on June 1, 2016. Johnson dutifully paid each of the

required monthly payments, but when the balloon payment became due in June

2016, funds were not available to make that payment. Yet, in anticipation of the

coming balloon payment, the bank discussed with Johnson how she might fund

the payment. Under a new forbearance agreement negotiated with Steven Phipps,

the vice president for credit management at First American, Johnson agreed to

pay $382 on June 1. Johnson paid the sum by money order, and it was cashed

June 3.

      After mailing the draft agreement to Johnson for her signature on June 13,

a dispute arose. Under that draft agreement proposal, Johnson would pay $425

per month starting on July 1, 2016, plus $760 towards the bank’s attorney fees and

$375 to be applied to interest, escrow, and outstanding fees. In exchange for these

payments, the bank agreed to extend the maturity date of the note to October 1,

2016. Johnson maintains the escrow payment of $402.66 had not been discussed

and was not appropriately in the draft agreement. The parties sparred over the

terms and were unable to come to a middle ground. Thus, the agreement was

never signed, and although Johnson sent the bank $425 on July 1, 2016, and
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another payment of $425 on August 1, 2016, no other payments were forthcoming.

The bank accepted the July payment.

       Because the balloon payment was not made, on July 11, 2016, the bank

mailed Johnson a notice to cure requiring her to pay all outstanding amounts within

thirty days. Likewise, the notice advised Johnson that if she did not cure the default

the bank would proceed with foreclosure. Johnson failed to cure the default within

the required thirty days.

       The bank sent yet another demand for payment of the accelerated balance

on September 15, 2016, alerting Johnson of the intent to foreclose and the right to

mediation. Again, Johnson failed to pay within the demand. Next on January 2,

2017, another notice to cure was sent to Johnson demanding payment of

$18,978.67 within ten days and informing Johnson if she failed to comply the bank

would file a warranty deed in lieu of foreclosure.

       Despite the demands and notices, the bank did not take further action

against Johnson. So without making any further payments, Johnson and her

daughter remained in the home. It was not until April 11, 2018, when the bank

again wrote to Johnson urging her to retain legal counsel or grant a family member

power of attorney to handle the default issue. A second letter repeated the same

request in May 2018. Finally, Johnson replied several weeks later disputing the

loan terms.

       To move the situation along, the bank believed that if they petitioned for

limited conservatorship over Johnson they would be able to resolve the delinquent

payment issue. The bank contacted an attorney to work towards establishing a

conservatorship, limited in scope towards making sure the ward pays Johnson’s
                                         5


obligations to the bank to allow her to remain in the home. With that plan in place,

the bank made one more attempt to negotiate a settlement with Johnson. That

letter, dated September 24, 2018, advised Johnson of the $31,872.89 payoff,

which included attorney fees, interest, and court costs. Johnson failed to pay that

payoff amount. So the bank proceeded by filing a conservatorship petition to

establish an involuntary limited conservatorship over Johnson. Even though he

had never met Johnson, Phipps signed the petition, which alleged she was a

person whose decision-making was so impaired that she was unable to make,

communicate, or carry out important decisions concerning her financial affairs.

Phipps had no medical training to make that determination but believed Johnson

had placed herself in a serious situation where she could lose her home and her

adult daughter’s residence.

      With the conservatorship pending, a confused Johnson believed that the

bank’s plan was to take away her freedom and her ability to care for her disabled

adult daughter. She was scared, upset, and had trouble sleeping but did not

consult with an attorney to represent her in the consumer conservatorship

proceeding. On November 26, 2018, the district court denied the bank’s request

to appoint a temporary conservator given the lack of medical evidence or any

information justifying the conservatorship. Undeterred, the bank moved to compel

Johnson to submit to a mental examination. Johnson then contacted an attorney

who filed an answer to the petition and counterclaims for abuse of process in

violation of the federal Truth in Lending Act.     The bank then dismissed the

conservatorship petition and commenced the foreclosure proceeding on January

28, 2019. Johnson answered the foreclosure petition in February 2019 along with
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a demand for delay of sale.      She also counterclaimed, advancing the same

counterclaims included in the conservatorship proceeding.

       On July 1, 2019, the bank moved for summary judgment on its foreclosure

action and on Johnson’s two counterclaims. Johnson resisted the motion and filed

her own partial summary judgment motion on the first two elements of her abuse-

of-process claim. Johnson dismissed all counterclaims except for the abuse-of-

process claim.    The summary judgment motion was heard on July 19 with

attorneys for each party present. The district court granted summary judgment to

First American on the foreclosure petition and dismissed the counterclaim for

abuse of process. After further filings, the district court awarded attorney fees and

costs based on the contract to First American. Johnson appeals all rulings, except

for the dismissal of the Truth in Lending Act claim.

   II. Standard of Review.

       When reviewing an order granting summary judgment in a foreclosure

proceeding, the standard of review is for correction of errors of law. Freedom Fin.

Bank v. Estate of Boesen, 805 N.W.2d 802, 806 (Iowa 2011). Our standard of

review involving actions for abuse of process is for correction of errors at law.

Royce v. Hoening, 423 N.W.2d 198, 200 (Iowa 1988).

       Because Johnson’s claims involve an appeal from the granting of summary

judgment, on review, our task is to determine whether any disputed issues of

material fact exist that would render summary judgment inappropriate and, if not,

whether the trial court correctly applied the law to the undisputed facts. See

Banwart v. 50th Street Sports, L.L.C., 910 N.W.2d 540, 544-45 (Iowa 2018). The

burden is upon the defendant bank to show the nonexistence of material facts and
                                          7

to prove they are entitled to judgment as a matter of law. See Knapp v. Simmons,

345 N.W.2d 118, 121 (Iowa 1984).          Every legitimate inference that can be

reasonably deduced from the evidence must be afforded the party resisting the

summary judgment motion, and a question of fact is generated if reasonable minds

could differ on how the issue should be resolved. C & J Vantage Leasing Co. v.

Wolfe, 795 N.W.2d 65, 73 (Iowa 2011). Entry of summary judgment is proper if

the conflict in the record concerns only the legal consequences flowing from

undisputed facts. Jacobs v. Stover, 243 N.W.2d 642, 643 (Iowa 1976).

       Finally, we review a district court’s award of attorney fees for an abuse of

discretion. Boyle v. Alum–Line, Inc., 773 N.W.2d 829, 832 (Iowa 2009).

   III. Analysis.

       We begin by addressing the bank’s motion to dismiss the appeal as

   untimely and then proceed to the issues raised by Johnson.

          A. Bank’s Motion to Dismiss.

       First American challenges Johnson’s appeal related to the matters resolved

by summary judgment as untimely. We must first resolve the threshold question

related to First American’s motion to dismiss the appeal because if the bank is

correct, we are without jurisdiction to consider that portion of Johnson’s appeal.

We consider challenges to our jurisdiction before other issues in a case. See

Tigges v. City of Ames, 356 N.W.2d 503, 511 (Iowa 1984). The general rule

requires an appeal to be filed within thirty days after a final judgment, order, or

decree, but there are certain enumerated exceptions.          See Iowa R. App. P.

6.101(1)(b) (requiring a notice of appeal to “be filed within 30 days after the filing

of the final order or judgment” unless “a motion is timely filed under Iowa R. Civ.
                                          8


P. 1.904(2) or Iowa R. Civ. P. 1.1007”). Those post-trial motions deemed to extend

the time for filing a notice of appeal are: motion for a new trial, motion for judgment

notwithstanding the verdict, and motion to enlarge the district court’s findings of

fact and conclusions of law pursuant to Iowa Rule of Civil Procedure 1.904(2). See

Fed. Am. Int’l, Inc. v. Om Namah Shiva, Inc., 657 N.W.2d 481, 483 (Iowa 2003);

see also Iowa Rs. Civ P. 1.1007 (requiring “[m]otions under rules 1.1003 [judgment

notwithstanding verdict] and 1.004 [new trial]” to “be filed within fifteen days after

filing of the verdict, report, or decision”), 1.904(2) (“On motion joined with or filed

within the time allowed for a motion for new trial, the findings and conclusions may

be reconsidered, enlarged, or amended . . . .”).

       So our first task is to answer whether we have jurisdiction to address the

appeal on the merits.2 Both parties agree that the final order from which to appeal

is the decree of foreclosure—dated September 24, 2019. That decree foreclosed

the property, entered judgment, and awarded attorney fees. But Johnson asserts

her motions extended the time for filing the appeal.

       Johnson’s motion to enlarge the decree of foreclosure was timely filed on

October 4. The motion contested the attorney fee award as unreasonable and

asked the court to reconsider the abuse-of-process ruling and the entry of default

on the mortgage. On the same date, without a hearing, the district court denied

the motion to enlarge as to any issues raised and decided by the summary

judgment ruling but set a hearing on Johnson’s challenge to the attorney fee



2 The bank refers to the dismissal of the abuse-of-process claim and the
entitlement to foreclosure as the “merits” of the case, so we will use that descriptor
as well.
                                         9


award. That attorney fee hearing was set for October 21, 2019. To clarify and

preserve error on arguments made in the first motion to enlarge but not referenced

by the district court in the ruling, on October 18, Johnson filed another motion to

enlarge—termed a “clarification.” On October 21, the court again confirmed its

summary judgment ruling and addressed the arguments that it first believed had

not been raised earlier. Then after the October 21 hearing on the attorney fee

issue, the district court entered an order on December 1 affirming the earlier

attorney fee set out in the foreclosure decree.

       First American concedes that Johnson filed a timely appeal on the issue of

attorney fees. The district court addressed the fee issue raised in the October 4

motion to enlarge on December 1, and Johnson appealed from that ruling on

December 4. As to the appeal on the merits, the bank argues that because the

ruling on the merits section of the motion to enlarge the decree occurred on

October 4—if you considered the first motion to enlarge—or occurred on October

21—if you considered the “clarification” or second motion to enlarge3—Johnson

had to file her appeal thirty days after those rulings and December 4 was too late.

Johnson contends she could wait until after the December 1 ruling because all

issues from the October 4 motion to enlarge were not yet resolved. Arguing that

the fee issue is collateral to the summary judgment merits, First American points

to Iowa Rule of Appellate Procedure 6.103(2) as dispositive:

       Attorney fee order entered after final judgment. A final order or
       judgment on an application for attorney fees entered after the final
       order or judgment in the underlying action is separately appealable.

3The bank asserts the second motion to enlarge did not extend the appeal time
because successive motion to enlarge do not keep tolling the appeal deadline, but
we do not need to address those arguments today.
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       The district court retains jurisdiction to consider an application for
       attorney fees notwithstanding the appeal of a final order or judgment
       in the action. If the final order or judgment in the underlying case is
       also appealed, the party appealing the attorney fee order or judgment
       shall file a motion to consolidate the two appeals.

Iowa R. Civ. P. 6.103(2) (emphasis added). First American references a case

where the appeal was untimely when the attorney fee issue was resolved after a

final ruling on the lawsuit and counsel waited to appeal the final ruling within the

thirty days after that attorney fee final order. See Bd. of Water Works Trs. v. City

of Des Moines, 469 N.W.2d 700, 703 (Iowa 1991). But here, the final order on

attorney fees included the final order on the merits—the attorney fee award did not

follow the order on the underlying action. See Gannon v. Willow Creek Century

Farms, L.L.C., No. 14-0293, 2015 WL 1849401, at *4 (Iowa Ct. App. Apr. 22, 2015)

(finding where final judgment and order on attorney fees were filed at the same

time, one notice of appeal is appropriate). Johnson’s motion to enlarge questions

the fees and the ruling on the merits. And while the district court first addressed

the merits in a ruling without a hearing, it reserved ruling on the fee question until

after a hearing was held. Thus, the December 1 date of the final ruling that

resolved all issues raised by the motion to enlarge was the proper date from which

to start the thirty-day appeal period. This was the final order resolving the lawsuit.

Franzen v. Deere & Co., 409 N.W.2d 672, 674 (Iowa 1987) (“A final judgment, one

that conclusively determines the rights of the parties and finally decides the

controversy, creates a right of appeal and also removes from the district court the

power or authority to return the parties to their original positions.”).

       Thus, we find Johnson timely appealed all issues raised by her in this case

and we have jurisdiction to decide her claims.
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             B. Did the district court appropriately grant summary judgment against

                Johnson in the foreclosure action?

         While Johnson claims there is a genuine issue of material fact that the bank

modified the April 30 modification agreement by a “meeting of the minds” as to the

2016 forbearance agreement, we see no factual dispute and no meeting of the

minds. The district court likewise found no genuine fact issue prohibiting the award

of summary judgment to the bank. The district court provided a detailed and

thoughtful analysis that addressed each and every argument raised by Johnson.

In the end, Johnson breached the April 30, 2013 modification agreement by failing

to pay the balloon payment that came due. The attempt to resolve matters under

the 2016 forbearance agreement failed when Johnson disputed the written terms

and never signed the agreement.

         To be bound by a contract, the parties to that agreement “must manifest a

mutual assent to the terms of the contract.” Rick v. Sprague, 706 N.W.2d 717, 724

(Iowa 2005). “[T]his assent usually is given through the offer and acceptance.” Id.

(alteration in original) (citation omitted).      “A binding contract requires an

acceptance of an offer.” Heartland Express, Inc. v. Terry, 631 N.W.2d 260, 270

(Iowa 2001).       The district court found no meeting of the minds to form a

forbearance agreement occurred and that any alleged tentative agreement failed

to meet the requirements of Iowa Code section 535.17(2) (2019).4 See First Am.


4   This section provides:
         Unless otherwise expressly agreed in writing, a modification of a
         credit agreement which occurs after the person asserting the
         modification has been notified in writing that oral or implied
         modifications to the credit agreement are unenforceable and should
         not be relied upon, is not enforceable in contract law by way of action
                                         12

Bank v. Urbandale Laser Wash, LLC, 874 N.W.2d 650, 655 (Iowa Ct. App. 2015)

(discussing contract principles and the statutory requirements to modify a credit

agreement).     The district court correctly granted summary judgment against

Johnson in the foreclosure action.

            C. Did the conduct of First American constitute abuse of process such

               that a summary dismissal of Johnson’s counterclaim was

               inappropriate?

       In the fighting issue of the case, Johnson portrays her abuse-of-process

claim as one of first impression, not only in Iowa, but in the nation. She sounds

the alarm to expose the actions of First American to use the conservatorship

process to induce vulnerable citizens to pay their bank debts. She finds several of

the bank’s efforts distasteful. Even so, we do not find the efforts to be actionable.

The district court dismissed the abuse-of-process counterclaim under the same

analysis.

       Still, Johnson emphasizes the bank used the conservatorship process to

compel her to pay its debt. That purpose was confirmed by First American in its

email correspondence to the proposed conservator when the bank attorney wrote:

“Your role as a conservator would be limited in scope to making sure the ward

pays her obligations to the bank.”




       or defense by any party unless a writing exists containing the
       material terms of the modification and is signed by the party against
       whom enforcement is sought. . . . When a modification is required
       by this section to be in writing and signed, such requirement cannot
       be modified except by clear and explicit language in a writing signed
       by the person against whom the modification is to be enforced.
                                            13


         To prove a claim of abuse of process, a plaintiff must show (1) use of the

legal process, (2) in an improper or unauthorized manner, and (3) that damages

were sustained as a result of the abuse. Gibson v. ITT Hartford Ins. Co., 621

N.W.2d 388, 398 (Iowa 2001). With respect to the second element of the cause

of action for abuse of process, “[t]he plaintiff must prove that the defendant used

the legal process primarily for an impermissible or illegal motive.” Stew-Mc Dev.,

Inc. v. Fischer, 770 N.W.2d 839, 849 (Iowa 2009) (alteration in original) (quoting

Gibson, 621 N.W.2d at 398).

         It is the second element where Johnson’s proof failed.               Finding no

impermissible or illegal motive, the district court determined Johnson failed to clear

the second hurdle of this claim. The court found:

         Finally, while First American may have been using the
         conservatorship process as a means to collect its debt from Johnson,
         there is no evidence the bank was using the proceeding to extort
         money it was not entitled to from Johnson or to collect more money
         than was owed to it. See Schmidt v. Wilkinson, 340 N.W.2d 282, 285
         (Iowa 1983) (noting the “essence of the tort is ordinarily any attempt
         to secure from another some collateral advantage not properly
         includable in the process itself” (citation omitted)). Indeed, if the bank
         had been successful in establishing the conservatorship, the most it
         could have hoped for or received was payment of the debt rightfully
         owed to it. There was thus no “collateral advantage” to the bank that
         was “not properly includable in the process itself.” Id.

         We find the district court applied the correct law to these undisputed facts

and appropriately dismissed Johnson’s abuse-of-process counterclaim.

   IV.      Attorney Fee Award.

         In our review of the attorney fee award, we afford the district court

considerable discretion. Boyle v. Alum–Line, Inc., 773 N.W.2d 829, 832 (Iowa

2009). Johnson asserts the fee award includes time for filing the “baseless”
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conservatorship. The district court knew the dynamics of the case and could

ascertain whether First American’s claim for fees included matters outside of the

contract terms. “Reversal is warranted only 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). We see no reason to disturb the fee order.

   V.      Conclusion.

        We deny First American’s motion to dismiss the appeal as untimely and

affirm the district court on all other issues raised on this appeal.

        AFFIRMED.