Nicole Adams v. Long Branch Maintenance Corp. ( 2020 )

IN THE COURT OF APPEALS OF IOWA
No. 19-0335
Filed August 19, 2020
NICOLE ADAMS,
Plaintiff-Appellant/Cross-Appellee,
vs.
LONG BRANCH MAINTENANCE CORP.,
Defendant-Appellee/Cross-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Guthrie County, Randy V. Hefner,
Judge.
Nicole Adams appeals and Long Branch Maintenance Corp. cross-appeals
the district court ruling denying Adams’s claim of property damage, entering a
declaratory judgment, and imposing judgment in favor of the corporation based on
unjust enrichment. AFFIRMED IN PART AND REVERSED IN PART ON
APPEAL; AFFIRMED ON CROSS-APPEAL.
Patrick B. White of White Law Office, P.C., Des Moines, for appellant.
Michael J. Streit and Louis R. Hockenberg of Sullivan & Ward, P.C., West
Des Moines, for appellee.
Considered by Vaitheswaran, P.J., and Mullins and Ahlers, JJ.
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AHLERS, Judge.
This appeal represents the latest chapter in the ongoing dispute between
Long Branch Maintenance Corp. (LBMC), an association of property owners, and
Nicole Adams, a property owner who signed a contract with LBMC. Adams began
this action by claiming LBMC damaged her property. LBMC answered with a
counterclaim, seeking a declaratory judgment that Adams is a member of LBMC
and requesting damages under a theory of unjust enrichment. The district court
denied the property-damage claim, entered a declaratory judgment finding Adams
was a member of LBMC, and awarded damages for unjust enrichment. We affirm
the denial of the property-damage claim and the grant of the declaratory judgment
in full, but we reverse the judgment based on unjust enrichment due to the contract
between the parties.
I. Background Facts and Proceedings.
In 2003, Adams purchased a home in the Diamondhead Lake
neighborhood. At that time, she signed a “Membership Agreement” (Agreement)
with LBMC wherein she agreed to be a member of and pay an annual assessment
to LBMC. Under the Agreement, LBMC agreed “to apply said membership
assessment to the operation of corporation as a non-profit organization whose
purposes are to assist in the betterment, cleanliness, maintenance and
beautification of Diamondhead Lake for the benefit of all members.” At the time of
trial, LBMC claimed 274 members. The amenities LBMC offers to its members
include providing and maintaining a 115-acre man-made lake with boat docks, two
parks with playground equipment, roads, and common areas.
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Adams initially paid membership assessments, but she stopped paying in
2009. In October 2011, LBMC filed a small-claims action against Adams for her
unpaid assessments. The small-claims court ruled in favor of Adams, finding she
was not a member obligated to pay assessments to the corporation because
LBMC failed to record the Agreement, as required by the Agreement. The district
court agreed with the small-claims court on its review, and we affirmed. See Long
Branch Maintenance Corp. v. Adams, No. 12-2020, 2014 WL 467516, at *7 (Iowa
Ct. App. Feb. 5, 2014). LBMC eventually recorded the Agreement on
September 22, 2014.
On October 20, 2016, Adams began the current proceeding, filing a small-
claims action asserting LBMC was responsible for damaging her property. LBMC
answered and counter-claimed, requesting a declaratory judgment recognizing
Adams has been a member who owes assessments since LBMC recorded the
Agreement and seeking all unpaid assessments under a theory of unjust
enrichment. Due to the amount asserted in the counterclaim exceeding the
jurisdiction of small claims court, the case was transferred to district court. See
Iowa Code § 631.8(4) (2016) (authorizing the entire proceeding to be tried in
district court when a counterclaim is asserted in a small claims action that exceeds
the jurisdictional limit of small claims). Following a bench trial, the district court
issued its ruling on January 4, 2019. The court rejected Adams’s property-damage
claim, finding she failed to prove LBMC trespassed on her property or the amount
of any damages. As to LBMC’s claims, the court agreed Adams had been a
member since LBMC recorded the agreement on September 22, 2014. The court
did not award past assessments under the Agreement, finding LBMC failed to
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prove its members approved the assessments, as required by the Agreement.
Regardless, the court found Adams owed damages to LBMC under the theory of
unjust enrichment, but the court disallowed damages arising prior to October 17,
2011, when Adams filed the prior small-claims action. The court awarded LBMC
damages of $16,863.26, equal to Adams’s total outstanding assessments since
October 17, 2011, plus interest, and the court denied LBMC’s request for attorney
fees. Both parties filed motions pursuant to Iowa Rule of Civil Procedure 1.904(2)
asking the court to reconsider various parts of its ruling. The court denied both
motions. Adams appeals, and LBMC cross-appeals.
II. Standard of Review
The district court tried the case at law. Accordingly, we review the property-
damage claim and request for declaratory judgment for correction of errors at law.
Iowa R. App. P. 6.907; Van Sloun v. Agans Bros., Inc., 778 N.W.2d 174, 178 (Iowa
2010) (“The court’s review of a declaratory judgment action depends upon how the
action was tried to the district court.”); Citizens Sav. Bank v. Sac City State Bank,
315 N.W.2d 20, 24 (Iowa 1982) (“[W]e will consider and review a case on appeal
in the manner it was treated below.”). “If substantial evidence in the record
supports a district court’s finding of fact, we are bound by its finding.” Iowa Mortg.
Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 2013). “However, a district
court’s conclusions of law or its application of legal principles do not bind us. Id.
“[A] claim for unjust enrichment is rooted solely in equitable principles.”
Iowa Waste Sys., Inc. v. Buchanan County., 617 N.W.2d 23, 30 (Iowa Ct. App.
2000). Accordingly, we review the unjust-enrichment claim de novo. Id. In de
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novo review, we give weight to the fact findings of the district court, but we are not
bound by them. Iowa R. App. P. 6.904(3)(g).
III. Property Damage
Adams claims the district erred in denying her property-damage claim,
which the district court analyzed as a claim of trespass resulting in property
damage.1 A trespasser is liable for damages resulting from the trespass. See
White v. Citizens Nat’l Bank of Boone, 262 N.W.2d 812, 817 (Iowa 1978). Adams
asserts LBMC entered her land during a road construction project and caused
$3761.12 in damage to her property. LBMC’s maintenance worker testified he
performed all work from the road or an easement without trespassing on Adams’s
property. Jim Mazour, the president of the board of directors of LBMC, testified it
was more accurate to describe any change to Adams’s property as “ditch
restoration” rather than damage. LBMC also introduced photographs of the current
state of Adams’s property. From this evidence, the district court concluded Adams
failed to prove by a preponderance of the evidence LBMC trespassed onto her
property or the amount of any damage to her property. This evidence is sufficient
to support the district court’s conclusion, and we affirm the denial of her property-
damage claim.
1 Adams’s property-damage claim began in small claims court. In her brief to us,
Adams asserts her cause of action for property damage is either intentional
destruction of property or negligence. Because the district court only applied the
theory of trespass to her property-damage claim and Adams raised no objection
with the district court that her claim was being limited to a trespass claim, she has
waived any claim of intentional destruction of property or negligence. See Meier
v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental doctrine of
appellate review that issues must ordinarily be both raised and decided by the
district court before we will decide them on appeal.”).
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IV. Declaratory Judgment
Both parties appeal the district court’s declaratory judgment. We address
their arguments in turn.
A. Membership in LBMC
Adams claims the district court erred in finding she was a member of LBMC.
As an initial matter, she asserts LBMC “is not a viable entity of any kind,” which
precludes it from designating her as a member or claiming any amount for unpaid
assessments or unjust enrichment. While Adams asserts LBMC does not qualify
as a “homeowners association,” her counsel acknowledged at trial that the Iowa
Code does not define “homeowners association” and the term’s definition derives
from “common usage.” There is no dispute LBMC is a duly-organized nonprofit
corporation registered and in good standing with the State of Iowa. Nonprofit
corporations are capable of enforcing their contractual and legal rights. See Iowa
Code § 504.302(1) (2016) (granting a nonprofit corporation the power to “[s]ue and
be sued, complain, and defend in its corporate name”). We agree LBMC is a viable
entity capable of asserting its claims here.
Regarding her claim she is not a member of LBMC, Adams asserts LBMC’s
failure to record the Agreement bars it from requiring her to pay assessments. That
was the holding in the parties’ prior action before this court. See Long Branch
Maintenance Corp., 2014 WL 467516, at *7. However, that action involved the
time prior to LBMC recording the parties’ membership agreement. That deficiency
was cured when LBMC recorded the Agreement on September 22, 2014. As the
district court noted, there was no limitation in the Agreement or Iowa law “requiring
that a membership agreement had to be recorded within a specified time,” “Adams
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was not prejudiced by the late recording,” and Adams “in fact substantially
benefitted” from the late recording. In short, the Agreement remained valid until
and after its recording on September 22, 2014. We agree LBMC’s prior failure to
record the Agreement did not prevent Adams from becoming a member after the
recording.
Adams also challenges her membership on the grounds that the corporate
president and secretary who signed her Agreement were not members at the time,
and, because they were not members, the Agreement cannot be valid. This
argument may fail for several reasons, but suffice it to say the district court found
“no convincing evidence that these two persons were not members.” The only
evidence Adams points to on this topic is her testimony that she could not find
recorded membership agreements for these persons. Sufficient evidence
supports the district court’s finding.
Next, Adams asserts she resigned as a member before her membership
took effect. She submitted an email to LBMC purporting to resign as a member on
July 23, 2011,2 well before LBMC recorded the agreement. Iowa Code section
504.621 allows a member of a non-profit corporation to “resign at any time,” but
this provision explicitly applies only to a “member.” Adams’s resignation and
arguments here make clear she does not believe she was ever a member of
LBMC, and, as explained above, we find she was not a member until the
Agreement was recorded. Because Adams was not a member at the time, we
2Adams wrote in her email to LBMC: “If it is proven in any way that I am a member,
based on Iowa Non-Profit laws, I believe I can resign as a member. So in this
case, I am submitting my resignation as of today as member of Long Branch
Maintenance Corporation.”
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agree her July 23, 2011 email was not effective as an “anticipatory resignation.”3
We find no error in the court’s ultimate conclusion that she was a member after
LBMC filed the Agreement on September 22, 2014.
B. Assessments Owed
In evaluating the contractual obligations under the Agreement, the district
court found LBMC did not prove the assessments it claimed Adams owed under
the Agreement “were approved by a majority of a quorum of members at a meeting,
as required by the bylaws.” LBMC points to Mazour’s testimony that LBMC’s
members approved the assessments in accordance with the bylaws. LBMC
argues this testimony establishes the assessments were properly approved and
the district court erred in failing to award damages under the Agreement in the
declaratory judgment.
It is important to remember the nature of LBMC’s counterclaim to the district
court. LBMC did not assert breach of contract, which would require it to prove it
performed all terms and conditions under the Agreement and the damages it
suffered due to Adams’s breach. See Iowa Mortg. Ctr., 841 N.W.2d at 111
(describing the elements of a breach-of-contract claim). Instead, LBMC sought a
declaratory judgment to establish obligations under the Agreement. “In general,
3 Furthermore, even if Adams were a member at the time she submitted her
resignation, her resignation would not relieve her of her financial obligations to
LBMC. See Iowa Code § 504.621(2) (“The resignation of a member does not
relieve the member from any obligations the member may have to the corporation
as a result of obligations incurred or commitments made prior to resignation.”).
This is consistent with the declaratory judgment finding Adams “will continue to be
obligated for financial obligations to” LBMC if she resigns in the future. Because
we affirm the declaratory judgment as written, this language is binding if Adams
resigns her membership in the future.
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‘the purpose of the declaratory judgment is to resolve uncertainties and
controversies before obligations are repudiated, rights are invaded, or wrongs are
committed.’” Dubuque Policemen’s Protective Ass’n v. City of Dubuque, 553
N.W.2d 603, 607 (Iowa 1996) (quoting 22A Am. Jur. 2d Declaratory Judgments
§ 1, at 670 (1988)); see also Iowa R. Civ. P. 1.1101 (“Courts of record within their
respective jurisdictions shall declare rights, status, and other legal relations
whether or not further relief is or could be claimed.”). In Iowa, a party may request
a declaratory judgment that establishes a breach of contract and orders damages.
See, e.g., Smutz v. Cent. Iowa Mut. Ins. Ass’n, No. 07-0187, 2007 WL 3085794,
at *8 (Iowa Ct. App. Oct. 24, 2007) (affirming a declaratory order finding an
insurance contract covered property damage and ordering the insurer to pay for
the loss); see also Iowa R. Civ. P. 1.1101 (“A contract may be construed [by
declaratory judgment] either before or after a breach.”). However, nothing requires
a party seeking a declaratory judgment to also seek damages if available. Accord
Bormann v. Bd. of Sup’rs, 584 N.W.2d 309, 313 (Iowa 1998) (“[T]he fact that the
plaintiff has another adequate remedy does not preclude declaratory judgment
relief where it is appropriate.”).
In LBMC’s counterclaim to the district court, its prayer asked the court to
“declare and construe [Adams’s] obligation to pay the dues, fees, and
assessments incurred since September 22, 2014 as a result of her status as a
member” and generally requested “other relief as may be appropriate,” but it did
not request an award of damages as a result of her status as member.4 In its post-
4 LBMC’s counterclaim states LBMC:
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trial brief, Adams asserted LBMC “is not making a claim for damages on the
Membership Agreement in this lawsuit,” noting the prayer only asserts “a right
hereafter to sue for past or future damages.” Accordingly, the district court’s
declaratory judgment language does not address any amount Adams currently
owes as damages, merely stating Adams is “obligated to pay dues, assessments,
fees late charges, interest and bank service fees, assessed by” LBMC.5
prays that the Court declare and construe Plaintiff’s status as a
member of the Defendant; declare and construe Plaintiff’s obligation
to pay the dues, fees, and assessments incurred since
September 22, 2014 as a result of her status as a member of the
Defendant; reserve jurisdiction to award supplementary relief in the
event the Plaintiff violates the terms of the Defendant’s Membership
Agreement and By-laws after its construction by the Court; that the
Court adjudge that Defendant have a right hereafter to sue for past
or future damages for the Plaintiff’s violation of the terms of the
Defendant's Membership Agreement as herein construed; or in the
alternative, if the Court determines the Plaintiff is not a member,
declare and construe the Defendant’s obligation to continue to
provide services to the Plaintiff and/or make its amenities available
to the Plaintiff; and for such other relief as may be appropriate to
adjudge and declare the rights of the parties.
5 The district court’s declaratory judgment language states in full:
Plaintiff, Nicole Adams, is hereby adjudged to be a member
of [LBMC] and has been a member since September 22, 2014. As
such, Nicole Adams is entitled to exercise all of the rights and
privileges of a member under the articles of incorporation and bylaws
of [LBMC], subject to the terms and conditions of those articles and
bylaws, including terms and conditions which limit or restrict a
member’s right to vote or use LBMC property for nonpayment of
financial obligations.
Nicole Adams is further obligated to pay dues, assessments,
fees, late charges, interest and bank service fees, assessed by
[LBMC] upon members consistent with its articles of corporation and
bylaws including any restrictions imposed upon a member’s right to
vote at corporate meetings or use corporate property for failure to
timely pay dues, assessments and fees when due.
If Nicole Adams resigns her membership in [LBMC], she will
continue to be obligated for financial obligations to the corporation as
provided in Iowa Code section 504.621(2). These financial
obligations include all financial obligations imposed upon member[s]
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Because LBMC did not request damages under the Agreement in its
counterclaim and failed to prove the assessments were properly approved, we find
no error in the court’s ultimate decision to not address the amount of assessments
owed in the declaratory judgment.6 Accordingly, we view the court’s discussion
of the assessments as nonbinding dictum—possibly to emphasize any damages
awarded were not owing under the Agreement—that finds LBMC did not prove the
amount of the assessments Adams owed solely for purposes of the declaratory
judgment proceeding. As a result, the declaratory judgment only establishes
Adams owes any assessments properly approved since September 22, 2014. The
declaratory judgment does not establish the amount of the assessments, nor does
the declaratory judgment establish the assessments were or were not properly
approved. LBMC is free, in a future proceeding, to assert breach of contract or
other claims arising from the Agreement that have not been previously pled.
V. Unjust Enrichment
“A claim for unjust enrichment ‘arises from the equitable principle that one
shall not be permitted to unjustly enrich oneself by receiving property or benefits
without making compensation therefor.’” Legg v. W. Bank, 873 N.W.2d 763, 771
(Iowa 2016) (quoting Ahrendsen ex rel. Ahrendsen v. Iowa Dep’t of Human Servs.,
of the corporation, including fees, assessments, dues, late charges,
interest and bank service fees assessed by [LBMC] upon members
consistent with its articles of incorporation and bylaws.
6 To the extent LBMC argues the court erred by finding it failed to prove the
assessments were properly approved, we find no error in the court’s decision that
the president’s testimony alone was insufficient to prove the assessments. See
State v. Thornton, 498 N.W.2d 670, 673 (Iowa 1993) (“The jury is free to believe
or disbelieve any testimony as it chooses and to give weight to the evidence as in
its judgment such evidence should receive.”).
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613 N.W.2d 674, 679 (Iowa 2000)). “Unjust enrichment exists when (1) one party
is enriched (2) at the expense of the other, and (3) it would be unjust under the
circumstances for the enriched party to retain the benefit.” MidWestOne Bank v.
Heartland Co-op, 941 N.W.2d 876, 886 (Iowa 2020).
LBMC’s unjust-enrichment claims rest on the proposition Adams was
unjustly enriched by using LBMC’s amenities without paying for them like other
property owners in the Diamondhead Lake neighborhood. Adams advances
several arguments, but we find the existence of the Agreement is dispositive. “[A]n
express contract and an implied contract cannot exist with respect to the same
subject matter.” Kunde v. Estate of Bowman, 920 N.W.2d 803, 807 (Iowa 2018).
The Agreement is an express contract for LBMC to collect assessments from
Adams in order to recover the cost of amenities. LBMC cannot rely on unjust
enrichment when it failed to satisfy the conditions precedent for recovering from
Adams under its express contract with her. See id. LBMC cites a case where a
neighborhood cooperative successfully claimed unjust enrichment to recover the
cost of amenities from non-paying property owners, but the property owners there
had no contract with the cooperative. See Okoboji Camp Owners Co-op. v.
Carlson, 578 N.W.2d 652, 654 (Iowa 1998). Even if an express contract between
LBMC and Adams did not exist due to the unrecorded Agreement, the equities do
not support unjust enrichment where LBMC was entirely at fault for failing to record
the Agreement that would have obligated Adams to pay the assessments. See
SDG Macerich Properties, L.P. v. Stanek Inc., 648 N.W.2d 581, 583 (Iowa 2002)
(“Equity aids the vigilant, not those who forget to perform a legal duty.”); SDG
Macerich, 648 N.W.2d at 589 (“We hold equitable relief is not available for a
13
commercial party who, through its own carelessness, failed to exercise its option
to renew a lease agreement.”). Therefore, we deny LBMC’s claim of unjust
enrichment and reverse the district court on this issue. Unlike claims arising under
the Agreement, any future claims of unjust enrichment are barred by res judicata.
VI. Conclusion.
On Adams’s appeal, we affirm the denial of her property-damage claim and
the finding she was a member of LBMC after it recorded the Agreement on
September 22, 2014. However, we reverse the district court’s grant of judgment
in favor on LBMC based on unjust enrichment due to the express contract covering
membership assessments. On LBMC’s cross-appeal, we find no error in the
court’s failure to address the assessments in the declaratory judgment, and we
affirm the declaratory judgment as written.
AFFIRMED IN PART AND REVERSED IN PART ON APPEAL;
AFFIRMED ON CROSS-APPEAL.