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Larry D. Schaeffer v. Dale L. Putnam

February 13, 2013

LARRY D. SCHAEFFER AND ELAINE M. SCHAEFFER, PLAINTIFFS-APPELLANTS,
v.
DALE L. PUTNAM, PUTNAM LAW OFFICE, SMP, L.L.C., LIBERTY BANK, F.S.B., G.R.D. INVESTMENTS, L.L.C., RAYMOND SCHAEFER AND DEAN SCHAEFER, DEFENDANTS-APPELLEES.
LIBERTY BANK, F.S.B., SUCCESSOR BY MERGER TO HANCOCK COUNTY BANK & TRUST, COUNTERCLAIMANT,
v.
LARRY D. SCHAEFER AND ELAINE M. SCHAEFER, DEFENDANTS TO COUNTERCLAIM.
LIBERTY BANK, F.S.B., SUCCESSOR BY MERGER TO HANCOCK COUNTY BANK & TRUST, CROSS-CLAIMANT,
v.
DALE L. PUTNAM, PUTNAM LAW OFFICE, G.R.D. INVESTMENTS, L.L.C., RAYMOND SCHAEFER, DEAN SCHAEFER, JENNIFER SCHAEFER, SMP, L.L.C., JESSICA LYNN KRAGEL N/K/A JESSICA OLMSTEAD. MORT'S, INC., FARMERS MUTUAL HAIL INSURANCE COMPANY, STATE OF IOWA, DUALE STAR, INC., FRED HOIBERG'S CLARION AUTO CENTER INC., MIDWESTONE BANK; UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICE, CHARLES BRADLEY PRICE, DEALER SERVICES CORPORATION AND PARTIES IN POSSESSION, DEFENDANTS IN CROSS-CLAIM.



Appeal from the Iowa District Court for Cerro Gordo County, James M. Drew, Judge.

The opinion of the court was delivered by: Tabor, J.

Larry and Elaine Schaeffer challenge the district court's subject matter jurisdiction over a counterclaimant's foreclosure action and appeal a separate order refusing to quash a sheriff's levy on their appellate rights in money damages sought in a civil suit. REVERSED AND REMANDED IN PART, AFFIRMED IN PART.

Heard by Vaitheswaran, P.J., and Tabor and Mullins, JJ.

This case involves two consolidated appeals brought by property owners Larry and Elaine Schaefer against creditor SMP, L.L.C. and Dale Putnam. In the first matter, the couple contends the district court lacked subject matter jurisdiction to hear SMP's counterclaim to foreclose the mortgage on their forty-acre farmstead. Because we interpret the farm mediation requirement in Iowa Code section 654A.6(1) (2009) to apply to counterclaims, we reverse the foreclosure against the agricultural property and remand for dismissal without prejudice.

In the second matter, the Schaefers argue the district court improperly ruled Putnam could levy for unpaid attorney fees against their right to appeal from their unsuccessful legal malpractice action. Because "choses in action" under Iowa Code section 626.21 encompasses a debtor's right to appeal the denial of his or her claims for money damages, the district court correctly determined those rights are subject to levy. We disagree with Putnam's assertion the issue is moot, and hold the district court did not abuse its discretion in refusing to grant the Scheafers' motion to stay execution.

I. Background Facts and Proceedings

On September 28, 2008, Larry and Elaine Schaefer filed suit against multiple parties including their former attorney Dale Putnam and SMP, L.L.C.*fn1 The Schaefers claimed Putnam was negligent in advising them to transfer property to a separate business entity to stave off creditor claims. The Schaefers also alleged a breach of fiduciary duty by Putnam and SMP-a limited liability corporation set up by Putnam and his wife to secure the Schaefers' loans as mortgages on their property. The Schaefers asserted that the breach of duty rendered the mortgages unenforceable.

Putnam counterclaimed for unpaid attorney fees. SMP also counterclaimed, seeking to foreclose on all mortgages including its $85,000 mortgage on the Schaefers' homestead and surrounding forty acres of farmland. The SMP claim asserted "[d]ue to the Plaintiffs filing their Petition, and the claim of SMP constituting a compulsory counterclaim, there is no requirement for mediation or a Notice to Cure."

The district court bifurcated the proceedings and held a jury trial on the Schaefers' claims against Putnam and SMP on February 8, 2011. The jury rejected the Schaefers' claims and awarded Putnam $12,200 in unpaid legal fees.*fn2 On June 6, 2011, the court entered judgment in rem in favor of SMP for $149,596.80 on the homestead agricultural property plus $86,079.25 in attorney fees. The Schaefers subsequently received a notice of sheriff's levy and sale of property including the homestead on behalf of SMP dated September 7, 2011.

In response, the Schaefers filed a motion to quash the sale, claiming SMP failed to obtain a mediation release as required by Iowa Code section 654A.6 before foreclosing on the mortgage, and asserting the homestead is subject to a one-year right of redemption. On December 7, 2011, the district court imposed the one-year redemption period, but rejected the Schaefers' argument that SMP's failure to obtain a mediation release before initiating foreclosure deprived the court of subject matter jurisdiction over the counterclaim. The Schaefers appealed the order denying their motion to quash.

The couple also received a notice of sheriff's levy and sale based on Putnam's $12,200 judgment for attorney fees. Issued on Putnam's behalf, the notice levied upon "[a]ll the right, title and interest" of the Schaefers to appeal the suit. Addressing their motion to quash, the district court held that under Iowa Code section 626.21, Putnam could levy on the Schaefers' appeal rights relating to their money damage claims, but not on claims brought against them. Because the order cancelled the sale, Putnam again levied on the couple's right to appeal. The district court denied the Schaefers' motion to quash and they appealed.

Our supreme court consolidated the Schaefers' two appeals in an order filed June 27, 2012.

II. Standards of Review

We assess rulings on subject matter jurisdiction for errors at law. Klinge v. Bentien, 725 N.W.2d 13, 15 (Iowa 2006). Questions of statutory construction also call for legal-error review. Zimmer v. Vander Waal, 780 N.W.2d 730, 733 (Iowa 2010).

To the extent the question on appeal is whether the district court should have stayed execution of the judgment for attorney fees, we would reverse only upon finding an abuse of discretion. See Chrysler Credit ...


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