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First Iowa State Bank v. Ronnie L. Hammond

April 10, 2013

FIRST IOWA STATE BANK, PLAINTIFF-APPELLANT,
v.
RONNIE L. HAMMOND, ET AL., DEFENDANT-APPELLEES.



Appeal from the Iowa District Court for Appanoose County, Annette J. Scieszinski (automatic stay, economic reconciliation) and Daniel P. Wilson (emergency motion to quash), Judges.

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

This consolidated appeal involves the bank's efforts to execute on a foreclosure decree by selling the Hammonds' property.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Heard by Eisenhauer, C.J., and Danilson and Bower, JJ.

This is a suit in equity by First Iowa State Bank to foreclose a real estate mortgage and execute on its 2008 foreclosure decree by selling the residential homestead of Kim and Ronnie Hammond. Although Kim filed a voluntary petition in bankruptcy the day before the August 2010 sheriff's sale, the sale occurred, and Jason Weems was the highest bidder. A second sale was held in April 2012, and State Bank was the highest bidder.

In this consolidated appeal, State Bank argues the court erred (1) in ruling the August 2010 sale is void due to the bankruptcy automatic stay and (2) in ordering the bank to reimburse Weems. The Hammonds appeal from a district court order denying their emergency motion to quash the April 2012 sale.

We affirm the rulings finding the first sale void and finding Weems is entitled to reimbursement from the bank. Due to the applicable statute of limitations, we reverse the court's denial of the Hammonds' emergency motion to quash the April 2012 sale.*fn1

I. Background Facts and Proceedings.

On September 29, 2008, State Bank obtained a foreclosure decree in Appanoose County for the residential homestead owned by Kim and Ronnie Hammond in Madison County. State Bank sought to have the property sold on August 17, 2010, at a Madison County sheriff's sale. The sale notice informed the public the Hammonds "may redeem the property within one year." On August 16, Kim filed for Chapter 7 bankruptcy in the Southern District of Iowa Bankruptcy Court. In her bankruptcy filing the Madison County property was listed as property of the estate and State Bank was listed as a creditor.

At the August 17 sheriff's sale, Jason Weems was the high bidder; he exceeded State Bank's bid by one dollar.*fn2 State Bank, the Madison County Sheriff, and purchaser Weems, at the time of this sale did not know of Kim's bankruptcy filing. On August 18, Weems paid $5207 in property taxes and $675 to insure the property.

On August 23, 2010, State Bank received notice of Kim's bankruptcy filing.*fn3 State Bank took no action. On August 27, State Bank received a check from the Madison County Sheriff for $106,501.94 in sale proceeds. State Bank cashed the check,*fn4 and on August 30, 2010, it executed, but did not file, a satisfaction stating its judgment had been paid in full.

Meanwhile, Weems waited for the one-year redemption period to expire. Kim's affidavit states she filed for bankruptcy to stop the sheriff's sale and she "was unaware the sheriff's sale apparently went forward . . . and did not become aware of that fact for more than one (1) year thereafter when Jason Weems knocked on my door and advised me that he believed that he own[ed] the property."

In August 2011, Weems sought a court order for a writ of possession, and Kim filed a motion to set aside the sheriff's sale due to the bankruptcy automatic stay. State Bank resisted while admitting "the filing of a Chapter 7 bankruptcy petition automatically stays proceedings." State Bank claimed Kim is barred by an election of remedies from setting aside the sale. It asserted she remained stealthfully silent in order to obtain the benefit of a one-year redemption period. As to Weems, State Bank argued he, not the bank, is the real party in interest and Weems now owns the 2008 judgment and he can execute thereon. State Bank alternatively argued if the sale is void, Weems is entitled to his money back from the bank without interest.

On November 18, 2011, the Appanoose County District Court found a "courtesy notice" of the automatic stay did not reach Madison County officials or State Bank due to a miscommunication by Kim's bankruptcy attorney. Further, State Bank "took no corrective action regarding the sale . . . perhaps concluding that the failure of a pre-sale notice of the bankruptcy would absolve it from the duty to act." The district court concluded the August 17, 2010 sheriff's sale is void and without effect due to the automatic stay becoming effective upon Kim's filing of the bankruptcy petition. The district court also ruled relief from the automatic stay can be granted only by the bankruptcy court and no such order authorized the August 17, 2010 sale. The court denied Weems's application for writ of possession, granted Kim's motion to set aside the sheriff's sale, and rescinded Weems's certificate of purchase and sheriff's deed. "This case resumes its status as it stood on August 16, 2010; the parties shall financially account to that end, through cooperation of counsel."

On November 28, 2011, State Bank filed (1) a motion to enlarge or amend the court's November 18 ruling and (2) a praecipe requesting the Appanoose County Clerk of Court issue a writ of special execution to the Madison County Sheriff for ...


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