ACC Holdings, LLC v. Todd Rooney ( 2022 )

IN THE SUPREME COURT OF IOWA
No. 21–0479
Submitted March 23, 2022—Filed April 29, 2022
ACC HOLDINGS, LLC,
Appellee,
vs.
TODD ROONEY,
Appellant,
and
PARTIES IN POSSESSION,
Defendants.
Appeal from the Iowa District Court for Warren County, Richard B. Clogg,
Judge.
A homeowner who failed to pay certain property taxes appeals the district
court’s grant of summary judgment to the tax deed holder in a forcible entry and
detainer action, arguing that the two-dismissal rule bars the tax deed holder’s
third action. REVERSED AND REMANDED WITH INSTRUCTIONS.
Mansfield, J., delivered the opinion of the court, in which all justices
joined.
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David R. Elkin of Law Office of David R. Elkin, Des Moines, for appellant.
Cameron K. Wright and R. Bradley Skinner of Skinner Law Office, P.C.,
Altoona, for appellee.
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MANSFIELD, Justice.
I. Introduction.
Iowa Rule of Civil Procedure 1.943 allows plaintiffs to dismiss their
petitions without prejudice and start over—once. In this case, a tax deed holder
tried to stretch the limits of this rule in a forcible entry and detainer (FED) action.
Twice, the tax deed holder purported to dismiss without prejudice its FED
petition against the property owner who had failed to pay taxes. Twice, the tax
deed holder refiled.
Under rule 1.943, a second voluntary dismissal operates as an
“adjudication on the merits” unless the court orders otherwise in the interest of
justice at or before the time of dismissal. Yet the district court allowed the third
FED action to go forward. We believe this was in error. The third action involved
the same tax deed and the same continued occupancy as the two prior actions;
therefore, it involved the same claim. For this reason, we reverse the judgment
of the district court granting the tax deed holder possession of the property and
remand for dismissal of this action. Our dismissal, however, does not preclude
the tax deed holder from bringing a quiet-title action.
II. Facts and Procedural History.
Todd Rooney owned a home at 2103 Shady Lane Drive in Norwalk, where
he has lived since 1987. Rooney failed to pay property taxes to the Warren
County Treasurer for the 2015 year. His home eventually went to tax sale on
June 19, 2017. ACC 298 LLC and Dutrac purchased the property for $2,985—
the amount then unpaid.
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Rooney did not redeem the property. Instead, after nearly three years had
elapsed, ACC 298 and Dutrac served a final notice to redeem on May 6, 2020.
See Iowa Code § 447.9(1) (2017). The notice advised Rooney that if he failed to
redeem the house within ninety days, the right of redemption would expire, and
ACC 298 and Dutrac would receive a deed to the property. Rooney still did not
redeem the property, so on August 26, ACC Holding LLC (ACC), as assignee of
ACC 298 and Dutrac, obtained a tax deed.
On September 22, ACC arranged for its first three-day notice to quit to be
served on Rooney. Eight days later, on October 1, ACC filed its first FED action
against Rooney with the small claims division of the Warren County District
Court. The petition alleged that Rooney was “possessing the property after the
issuance of a valid tax deed.” Rooney moved to dismiss the first FED for lack of
subject matter jurisdiction on the ground that the small claims division does not
have jurisdiction over FED actions based on tax deeds. See id. § 631.1(2). On
October 16, before the small claims court had ruled on Rooney’s motion to
dismiss, ACC voluntarily dismissed its first FED action without prejudice.
Meanwhile, on October 15, one day before dismissing its small claims
petition, ACC had already filed its second FED action—this time in the district
court itself. Attached to this petition was the same September 22 notice to quit
that had accompanied the petition previously filed in small claims court. On
December 22, without stating a reason, ACC voluntarily dismissed the second
FED petition.
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Once again, ACC had already filed another FED action. On December 21,
ACC brought its third FED petition. This petition was also filed in the Warren
County District Court and alleged that Rooney “remain[ed] in possession after
the issuance of a valid tax deed.” Attached to this petition was a new three-day
notice to quit that had been served on December 15.
An FED hearing was set for January 5, 2021. On January 4, Rooney
answered and moved for summary judgment. He asserted three defenses: (1) the
two-dismissal rule of Iowa Rule of Civil Procedure 1.943, (2) the thirty-days’
peaceable possession defense in Iowa Code section 648.18, and (3) a claim that
he had a legal disability entitling him to additional time to redeem the property
pursuant to Iowa Code section 447.7. Regarding the third defense, Rooney
asserted that on October 15, 2020, he had filed a separate action challenging the
tax deed sale on the basis of legal disability. See id. § 447.7(3) (providing that the
person with a legal disability forfeits any right of redemption when an action for
possession is brought unless that person files a counterclaim or a separate
action).
At the hearing, the parties presented legal argument on the first two
issues. They also agreed that the district court could try the issue of whether
Rooney has a legal disability. Concerning that third issue, Rooney testified that
he has had a reading disability since fourth grade. But he acknowledged that he
ended up graduating from college and owning a concrete contracting business.
He said that he’s “very good” at what he does and “[has] been doing it for twenty
years.” Rooney also explained that he had been injured in a hunting accident
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about a year and a half earlier that left him temporarily paralyzed below the waist
and still caused him considerable pain. Rooney admitted that he handled the
secretarial work for his concrete business “and worked with the taxes and stuff.”
Rooney also admitted that he handled the preparation of his own personal
income tax returns.
On March 14, the district court entered an order denying Rooney’s motion
for summary judgment and awarding possession to ACC. On the first issue, the
court held that the voluntary dismissals of the previous FED actions by ACC
“were not final adjudications pursuant to Iowa R. Civ. P. 1.943.” On the matter
of thirty days’ peaceable possession, the court reasoned that Rooney’s ongoing
possession of the property “g[ave] rise to new causes of action as time passe[d].”
Finally, the court found the evidence insufficient to establish Rooney had a legal
disability.
Rooney appealed, and we retained the appeal.
III. Standard of Review.
“Forcible entry and detainer actions are equitable actions, and therefore
our scope of review is de novo.” Porter v. Harden, 891 N.W.2d 420, 423–24 (Iowa
2017).
IV. Legal Analysis.
A. Impact of the Two-Dismissal Rule on ACC’s Third FED Action. Iowa
Rule of Civil Procedure 1.943 provides,
A party may, without order of court, dismiss that party’s own
petition, counterclaim, cross-claim, cross-petition or petition of
intervention, at any time up until ten days before the trial is
scheduled to begin. Thereafter a party may dismiss an action or that
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party’s claim therein only by consent of the court which may impose
such terms or conditions as it deems proper; and it shall require the
consent of any other party asserting a counterclaim against the
movant, unless that will still remain for an independent
adjudication. A dismissal under this rule shall be without prejudice,
unless otherwise stated; but if made by any party who has previously
dismissed an action against the same defendant, in any court of any
state or of the United States, including or based on the same cause,
such dismissal shall operate as an adjudication against that party on
the merits, unless otherwise ordered by the court, in the interests of
justice.
(Emphasis added.)
Notwithstanding the district court’s reasoning, we think it is clear that
each voluntary dismissal was final. See Valles v. Mueting, 956 N.W.2d 479, 484
(Iowa 2021) (stating that a voluntary dismissal “was self-executing and marked
the date of finality for appeal purposes”). Also, it is clear that the first two FED
actions involved the same cause of action because they relied on the very same
three-day notice to quit. Therefore, pursuant to rule 1.943, the voluntary
dismissal of the second FED action “operate[d] as an adjudication . . . on the
merits, unless otherwise ordered by the court, in the interests of justice.”
In Smith v. Lally, 379 N.W.2d 914 (Iowa 1986), we expounded on the
meaning of this final clause of rule 1.943 (which was then known as rule 215).
In Smith, the plaintiffs filed a medical malpractice action originally in Johnson
County. Id. at 915. When the defendants moved for a change of venue, the
plaintiffs refiled in Scott County and voluntarily dismissed without prejudice
their Johnson County action. Id. Again the defendants moved for a change of
venue, and again the plaintiffs refiled—this time in Dubuque County—and
dismissed their Scott County action without prejudice. Id. We held that the two-
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dismissal rule barred the plaintiffs’ action in Dubuque County even though the
plaintiffs had brought their new actions before voluntarily dismissing their old
ones. Id. at 915–16. We explained, “The purpose of the rule is to prevent
indiscriminate dismissals of actions by litigants. Repeated filings and dismissals
obviously have a harassing effect that the two-dismissal rule is designed to
prevent.” Id. at 916 (citation omitted).
We also found that the Scott County district court had correctly ruled that
it could not “enter a subsequent order determining in the interests of justice that
the dismissal would not constitute an adjudication against plaintiffs on the
merits.” Id. “[S]uch a determination could only be made before or
contemporaneously with the dismissal.” Id.Given Smith v. Lally, the only open question is what significance the
adjudication on the merits of ACC’s second FED action holds for ACC’s third FED
action. ACC maintains that its third FED action was a new and separate claim
based on Rooney’s continued occupancy of 2103 Shady Lane Drive during the
fall of 2020. We disagree.
In this case, the third FED action involved the same transaction as the
first two. It didn’t present new conduct (i.e., conduct that didn’t exist before) or
an additional breach (e.g., the failure to pay additional monies). There was,
instead, the same tax deed plus the same ongoing and continuous fact of
occupancy. If we exempted this situation from the two-dismissal rule, then it
would be difficult to see when that rule could ever apply to equitable claims
where the defendant’s conduct, by its nature, continues.
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In Conkling v. Conkling, we rejected the application of the two-dismissal
rule to a divorce petition. 185 N.W.2d 777, 783 (Iowa 1971). We acknowledged
that the “defendant’s dismissal of her second divorce suit on November 3, 1967,
constitutes an adjudication against her on the merits to that date.” Id. at 782.
But we found that any “intervening events” after the date of the second dismissal
could be raised. Id. at 783. Here, in contrast, there are no subsequent events
other than the same occupancy as before.
This is like U.S. Bank National Ass’n v. Gullotta, where the Ohio Supreme
Court held that the two-dismissal rule barred a mortgagee from bringing a third
foreclosure action on the same accelerated debt. 899 N.E.2d 987, 988 (Ohio
2008). As the court explained,
The significant facts here are that the underlying note and mortgage
never changed, that upon the initial default, the bank accelerated
the payments owed and demanded the same principal payment that
it demanded in every complaint, that Gullotta never made another
payment after the initial default, and that U.S. Bank never
reinstated the loan.
Id. at 990; see also Nolan v. MIA Real Holdings, LLC, 185 So. 3d 1275, 1276 (Fl.
Dist. Ct. App. 2016) (“The two voluntary dismissals, taken by two different
plaintiffs but involving the same note and the same breach, required that the
second dismissal operate as an adjudication on the merits; if it wanted to pursue
its claim for non-payment, MIA was required to refile a lawsuit against the
homeowners alleging a new and separate breach by non-payment on the note.”).
There is some contrary authority. See, e.g., In re Foreclosure of a Deed of Trust
Executed by Herndon, 781 S.E.2d 524, 530 (N.C. Ct. App. 2016) (holding that a
third foreclosure action was not barred by the lender’s prior election to accelerate
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payment on a note because additional defaults in payment occurred subsequent
to the dismissal of each of the two prior actions). Yet, even in such cases, the
defendant committed additional defaults, not merely continued occupancy.
Finally, consider a thought experiment. Suppose a district court had
involuntarily dismissed the second FED action. Would a district court have
allowed ACC to bring a third FED action based merely on the same tax deed and
the same continued occupancy? We think clearly not. Accordingly, rule 1.943
barred ACC’s third FED action, and it was error for the district court to conclude
otherwise.1
B. Would a Quiet-Title Action Be Barred? Because this issue is likely to
arise in the near future, we now address whether today’s decision would bar ACC
from bringing a quiet-title action against Rooney. Cf. Petty v. Faith Bible Christian
Outreach Ctr., Inc., 584 N.W.2d 303, 308 (Iowa 1998) (stating that the thirty days’
peaceable possession bar in Iowa Code section 648.18 “does not preclude
ordinary actions for possession of real estate which may be brought under
chapter 646 (recovery of real property)”).
We believe it would not.
Since an action in forcible entry and detainer does not usually
affect title to the premises, the judgment is generally not a bar to an
action between the same parties relating to the title to the premises
or to litigation of the issue of title in the second action, such as
actions of ejectment, foreclosure actions, actions of trespass, actions
1In Bank of New York Mellon v. Dodev, the Arizona Court of Appeals found that the two-
dismissal rule in Arizona’s Rules of Civil Procedure did not apply to an FED action. 433 P.3d
549, 556 (Ariz. Ct. App. 2018). However, that decision was based on the fact that Arizona applies
a separate set of procedural rules, rather than its normal rules of civil procedure, to FED cases.
Id. Iowa does not take that approach.
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of trespass to try title, and actions to quiet title.
50 C.J.S. Judgments § 1162, at 597–98 (2021) (footnotes omitted). In Iowa, a
quiet-title action may not be joined with an FED action. See Iowa Code
§ 648.19(1); Restatement (Second) of Judgments § 26(1)(c), at 233–34 (Am. L.
Inst. 1982) (setting forth an exception to the rule against claim splitting when
there were restrictions on the court’s authority “to entertain multiple theories or
demands for multiple remedies or forms of relief in a single action, and the
plaintiff desires in the second action to rely on that theory or to seek that remedy
or form of relief”).
It is true that in Iowa, “title is a justiciable issue in a forcible entry and
detainer action when the action has been originally commenced in district court.”
Steele v. Northup, 168 N.W.2d 785, 788 (Iowa 1969). But here, only one of the
two voluntary dismissals involved a proceeding filed in district court, where title
could have been adjudicated. And, in any event, the issue of title wasn’t
adjudicated.
We take note of Lowery Investments Corp. v. Stephens Industries, Inc., 395
N.W.2d 850 (Iowa 1986). This was a dispute between a buyer and seller of
commercial real estate under an installment contract. Id. at 850–51. The buyer
failed to make certain payments, so the seller attempted to follow the statutory
procedure to forfeit the buyer’s interest. Id. at 851. To avoid the effects of the
forfeiture, the buyer brought a declaratory judgment action. Id. Around the same
time, the seller brought an FED against the buyer. Id. In the FED action, the
parties entered into a settlement. Id. at 852. However, the buyer failed to perform
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its end of the settlement. Id. This led to a hearing and a judgment being entered,
granting the seller possession of the property. Id. The seller also subsequently
lost its declaratory judgment case and appealed. Id. at 850.
In light of the judgment in the FED action, we held that the doctrine of
“claim preclusion” barred the seller’s separate declaratory judgment action. Id.at 852–53. But, critically, we did so on the basis that the validity of the forfeiture
had already been litigated and resolved in the FED action. Id. at 853. As we put
it,
[T]he validity of the vendor corporation’s action in forfeiting the
interest of the vendee corporation under the contract was
necessarily resolved adversely to the vendee corporation in the
forcible entry action. The allegations of the petition in the forcible
entry action make it clear that the vendor corporation’s asserted
right of possession was dependent upon the validity of the forefeiture
under Iowa Code chapter 656.
Id. In that sense, Lowery appears to be more about issue preclusion than claim
preclusion. We believe it should be recognized as such.
Here, the challenge to ACC’s title relates to an alleged legal disability
affording Rooney additional time to redeem the property. See Iowa Code § 447.7.
Under the law, that claim must be asserted in a separate action or counterclaim.
Id. Rooney did file a separate action. Although the parties agreed that whether
Rooney suffered from a legal disability would be determined as part of the FED
case, we have today held that the FED case should have been dismissed ab initio
with prejudice. Therefore, the entire FED judgment must be vacated. Given that
the legislature had directed that the title challenge based on disability and the
action for possession be divided, the dismissal of the latter should not preclude
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the issue of title from being tried in another non-FED proceeding. For example,
ACC could bring a quiet-title action against Rooney. See Restatement (Second)
of Judgments § 26(1)(d), at 234 (allowing claim splitting when “it is the sense of
[a statutory] scheme that the plaintiff should be permitted to split his claim”).
We also note that the alternative—i.e., foreclosing ACC from bringing a
quiet-title action—would “fail[] to yield a coherent disposition of the controversy.”
Id. § 26(1)(f), at 234 (describing another exception to the rule against claim
splitting). If claim preclusion barred a quiet-title action, one party would have a
tax deed and would be the record titleholder to the property, another party would
have possession, and the first party would be unable to sue the second party to
break the deadlock. A comment to the Restatement (Second) of Judgments
suggests there can be a “rare” instance “when the disposition of a claim and
counterclaim in a prior action has left the parties with inconsistent interests in
disputed property.” Id. § 26 cmt. i, at 243. The Restatement then gives the
illustration of “A” having sold property to “B,” but “B” through a litigation error
having had its action to obtain proper title dismissed with prejudice. Id. § 26
cmt. i, illust. 9, at 243–44. Under the illustration, “B” would still be able to sue
to establish proper title. Id. In some respects, that illustration is analogous to
the present case. Barring ACC from bringing a quiet-title action would leave this
property “in an unstable and intolerable condition.” Id. Accordingly, we hold that
ACC is not barred from bringing a quiet-title action and pursuing the remedies
available therein. See also Kruckenberg v. Harvey, 694 N.W.2d 879, 888–89 (Wis.
2005) (applying Restatement (Second) of Judgments § 26(1)(f) in determining that
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a prior dismissal with prejudice did not bar a court from hearing an action to
determine the boundary line between two properties).
V. Conclusion.
In light of our conclusion with regard to rule 1.943, we do not reach
Rooney’s other appellate arguments.
For the foregoing reasons, we reverse the judgment of the district court
and remand the case for dismissal with prejudice.
REVERSED AND REMANDED WITH INSTRUCTIONS.