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Halvorson v. Bentley

Court of Appeals of Iowa

December 21, 2016

ROGER HALVORSON and CONSTANCE HALVORSON, Plaintiffs/Counter-Claim Defendants-Appellees,
ALLEN BENTLEY and DIXIE BENTLEY, Defendants/Counter-Claim Plaintiffs/Cross-Claim Plaintiffs-Appellees/ Cross-Appellants, and KERNDT BROTHERS SAVINGS BANK, Defendant/Cross-Claim Defendant-Appellant/Cross-Appellee.

         Appeal from the Iowa District Court for Clayton County, Andrea J. Dryer, Judge.

         Seller Kerndt Brothers Savings Bank appeals and land purchasers Allen and Dixie Bentley cross-appeal the order of the district court finding that the Bank breached its warranty under its deed to the Bentleys because it represented the easement on the adjoining land it sold to Roger and Constance Halvorson permitted parking when the language of its contract with the Halvorsons only expressly mentioned "access." JUDGMENT VACATED IN PART, AFFIRMED IN PART, AND REMANDED WITH DIRECTIONS.

          Dennis G. Larson of Larson Law Office, Decorah, and James A. Garrett of James A. Garrett Law Office, Waukon, for appellant/cross-appellee Kerndt Brothers Savings Bank.

          J.K. Robison and Anne E.H. Kruse of Allen, Vernon & Hoskins, P.L.C., Marion and McGregor, for appellees/cross-appellants Bentley.

          Alan T. Heavens of McClean & Heavens Law Offices, Elkader, for appellees Halvorson.

          Heard by Danilson, C.J., and Doyle and McDonald, JJ.

          DOYLE, Judge.

         The dispute in this case concerns an easement on land Kerndt Brothers Savings Bank (Bank) sold to Roger and Constance Halvorson. The easement was granted for the benefit of the adjoining lot of land, which the Bank sold to Allen and Dixie Bentley. The central issue is whether or not the easement grants the Bentleys parking privileges. Following trial on the Halvorsons' petition for declaratory judgment, along with the Bentleys' cross-claims against the Bank, the district court concluded the easement only granted the Bentleys "access" to their land-meaning ingress and egress only, not parking. Because the warranty deed the Bank delivered to the Bentleys does not limit the easement to access only, the court found the Bentleys were entitled to the consideration they paid to the Bank for the easement they thought they were getting-one that allowed parking, and awarded the Bentleys $7500 in compensatory damages. The court also awarded the Bentleys their attorney fees for defending the Halvorsons' action. The court then entered a judgment against the Bank in favor of the Bentleys for $21, 757.28.

         The Bank now appeals the district court's ruling in favor of the Bentleys, arguing both the Bentleys and the Halvorsons received the easement they bargained for with the Bank and, therefore, it did not breach any warranty deed. The Bentleys cross-appeal, challenging the court's determination the easement was for ingress and egress only.

         I. Background Facts.

         The facts of the case are essentially undisputed. In 2009, after its mortgagee defaulted on a loan, the Bank acquired title to the real estate that secured the mortgage loan. The property consisted of several lots in the picturesque river town of Marquette. A two-level duplex was located on one of the lots. A house that was in "very bad shape" was located on an adjoining lot to the west. The two buildings were situated on a steep hill on the south side of the west end of North Street. The house and the duplex were separated by a path that was used as a driveway (Driveway), shown in the aerial photo below.[1] The Driveway inclines from North Street at a grade of approximately ten to fifteen percent and flattens out near its southern terminus.

         (Image Omitted)

         In making the duplex conversion, the mortgagee "cut the roof off and raised it up so [he] could have an upstairs." He then "added on to make it a duplex, " and he "took the [interior] stairs out of the house." Without interior stairs, there was no access between units inside the duplex. To provide access to the upper unit, the mortgagee installed an exterior door on the south side of the unit and built a walkway from that exterior door to the southern terminus of the Driveway. Because of the incline and the topography, the walkway was built in a southwest direction where it eventually met the Driveway at an acute angle. The mortgagee lived in the upper-level unit of the duplex and parked his vehicle at the end of the Driveway near the walkway. The mortgagee made the lower level of the duplex into a rental unit. Another driveway, which could hold two or three vehicles, existed on the north side of the lower level of the duplex. Parking in front of the duplex on North Street would obstruct the driveway to the house.

         After the Bank acquired the property, it decided to sell the property in separate lots, with the house and duplex each in its own separate lot. To that end, the Bank hired Roger Mohn, a civil engineer and professional land surveyor, to identify the exterior lot lines of the property so it could divide the property into lots accordingly.

         Based upon the boundaries of the existing lots, which can be seen in the aerial photo above, the Driveway and most of the walkway fell within the house lot-not the duplex lot. The Bank determined an easement would be established on the house lot to allow the future owners of the duplex lot to reach the entrance of the duplex's upper-level unit. Based upon the topography of the house lot, the existing Driveway path and walkway were used for determining the placement of the easement. After the surveyor informed the Bank's representative James Kerndt that easements were normally between ten to twelve feet wide, it was decided the easement would be twelve feet wide.

         On February 2, 2010, the plat of the lots prepared by the surveyor was recorded-without the easement shown or described therein. Though the surveyor provided to the Bank a metes and bounds description of the centerline of the proposed easement, the Bank did not have that description recorded with the plat. The proposed easement's written description stated, in relevant part: "A twelve (12) [sic] wide easement located in Lot Ten (10) of Block Five (5) and in vacated Third Street . . . ." The description went on to set forth the metes and bounds of the centerline of the easement. The proposed easement did not include the terms "access, " "ingress, " "egress, " or "parking"; in fact, no purpose for the easement was given in the written description.

         Roger Halvorson contacted Kerndt at the Bank about buying some of the lots on the property. The Halvorsons live three blocks from the property, and they operate a winery on North Street near the property. Roger wanted to preserve the hillside where the house was located and "had strong feelings about preventing anyone from developing that hillside." Roger was advised that if he did not purchase both the house lot and the duplex lot, an easement across the house lot would be necessary to allow the future owners of the duplex lot access to the duplex's upper-level unit. On February 20, 2010, the Halvorsons made and the Bank accepted a written offer to purchase several lots of land, including the house lot but not the duplex lot. The offer stated on the first page that it was subject to "an easement to be placed approximately in existing driveway for access to adjacent house upper level." Handwritten next to the above quoted sentence were the words "Exhibit C." Exhibit "C" was attached to the agreement and set forth the metes and bounds description of the centerline of the easement exactly as drafted by the surveyor.

         The Bank listed the duplex lot for sale with a realtor. Allen and Dixie Bentley contacted another realtor, who was with the same realty agency as the Bank's realtor, to view the duplex lot, and they and their realtor viewed the property together. The Bentleys liked the property but were concerned about the parking situation for the upper-level unit of the duplex. The Bentleys' realtor expressed the Bentleys' concerns about the parking situation to the Bank's realtor, and the Bank's realtor clarified with Chad Curtain, a representative of the Bank, that an easement would be drawn up "to amend the problem." The Bank's realtor believed that "parking was involved in the negotiations, " though it "did not end up being in the easement description." The Bank's realtor believed the purpose of the easement was for parking. Ultimately, the Bentleys decided to purchase the duplex lot and the closing occurred sometime around the beginning of July 2010. The warranty deed for the duplex lot was recorded on July 12, 2010, and it sets forth the metes and bounds description of the easement exactly as proposed by the surveyor. The easement's description lacks any explicit reference to "access, " "parking, " or purpose.

         It appears the Halvorsons never had a formal closing. The Bank had quitclaimed some of the property the Halvorsons intended to purchase "to provide [them] basically with possession while the [Bank] continued its efforts to foreclose on the property." The Halvorsons received a warranty deed for the house, as well as other land they purchased from the Bank. The deed was signed by the Bank's representatives July 14, 2010 and recorded July 19, 2010. The Halvorsons' warranty deed makes no reference to the easement.

         After their purchase, the Bentleys used the Driveway as a driveway. They parked their vehicles at the end of the driveway near the walkway. At some point, the Halvorsons had the house torn down, creating more open area by the Driveway. Sometime thereafter, a neighbor contacted Roger and told him, "You better come up here. You got a parking lot up here." Roger went to investigate and found "there were four cars up there. There was the Bentleys' pickup, . . . and a car, and a couple other pickups. So there [were] a number of people parked . . . on the lots up there." And the battle began.

         When the parties could not reach an agreement, the Bentleys contacted the surveyor and requested that he draw a plat of the easement based upon the metes and bounds set forth in their deed. The surveyor then platted the easement and lots. That platting is distilled into the following illustration:

         (Image Omitted)

         II. Proceedings.

         In July 2011, the Halvorsons filed a petition "in equity" and "for declaratory judgment" against the Bentleys and the Bank. The Halvorsons requested the district court declare "the nature and scope of the easement [was] limited to ingress and egress only and that it may not be used by the Bentleys for any other purpose, " declare the "size and dimensions of the easement [were] limited to the narrowest possible [twelve]-foot strip of land, " and find the Bank negligent and award the Halvorsons damages. The Bank admitted in its answer that its "understanding and intent with respect to the [Bentleys'] easement" was that the Bentleys could come and go across the easement but had no right to park there. The Bank denied it was negligent and affirmatively asserted it did not owe the Halvorsons any duty with respect to the Bentleys' easement "in that the Bentley transaction was fully consummated prior to the [Halvorsons'] acquisition" of the house lot that was subject to the easement.

         The Bentleys answered and asserted counterclaims against the Halvorsons, including a claim that the Halvorsons intentionally damaged the Bentleys' property. The Bentleys also asserted cross-claims against the Bank for breach of warranty and breach of contract. The Bank answered the Bentleys' cross-claims and admitted "that no express limitation on the scope of the easement [was] set forth on the face of the deed, " but it affirmatively stated "the real estate description for the easement [made] it clear that motor vehicle access [was] not included within its scope." The Bank denied that "there was a meeting of the minds between [the] Bentleys and the [Bank], through its employed real estate agent, that the easement would be used for travel over and across the servient estate, and for parking a vehicle thereon."

         A bench trial was held in May 2014. At the trial's outset, the court noted it had before it "a blend of legal and equitable claims, " and it advised the parties it was "going to try this as if the whole [was] in equity, " but that when evidence was offered to which there was an objection, each party should "state your objection" and "the basis for your objection so that it's in the record." The court stated it would admit the evidence subject to the objections and explained it would not consider irrelevant or inadmissible evidence with respect to each claim in making its decision.

         At trial, Roger Halvorson admitted he read the legal description of the easement, but he testified he "just assumed that the easement was going to go closer to the property line rather than . . . meandering back through the other two lots." Roger did not know the prior owner/mortgagee had been parking in the Driveway; Roger testified he had "never visualized the driving and parking situation" and believed "[a]ccess was by foot traffic primarily." Curtain testified he told the Bank's realtor that he "believed there was going to be an easement, " but he did not "have any specifics." The Bank's realtor testified she did not remember Curtain expressly using the word "parking, " but she believed it was Curtain's understanding that the purpose of the easement was for parking, testifying "[t]hat was the purpose of the easement."

         Following trial, the court entered its decree on March 3, 2015, finding the easement created by the Bank was for "access" only, meaning the right to ingress and egress and not for parking. The court noted that the Bentleys' deed does not define any purpose for the easement, and it relied upon the Halvorsons' purchase agreement which only references "access." The court found the easement was intended to be twelve feet wide. Additionally, the court found this easement was what the Halvorsons bargained for, so the Bank was not negligent in this respect.

         As to the Bentleys, the court found the easement set forth in their warranty deed was not accurate because the easement omits the "access" limitation language that is included in the Halvorsons' purchase agreement, which predated the Bentleys' deed. Since the Bank chose to include the easement's description in the warranty deed it gave to the Bentleys, the court found the Bank had a duty to defend the Bentleys in the Halvorsons' declaratory-judgment action concerning the easement, and it awarded the Bentleys attorney fees of $14, 257.28. The court also found the Bank was liable "for the amount of consideration that [the Bentleys] paid for the easement described in their warranty deed rather than the easement that was created" in the purchase agreement between the Bank and the Halvorsons. The court found $7500 was "approximately what the Bentleys paid in the expectation that they would receive the easement described in their warranty deed rather than the more limited easement that they actually received." The court concluded the Bentleys did not prove any breach of contract separate from the warranty deed, and it entered a final judgment in favor of the Bentleys for $21, 757.28 against the Bank. The court also denied the Bentleys' counterclaims against the Halvorsons.

         III. Post-Trial Proceedings.

         On March 9, 2015, the Bank filed a motion pursuant to Iowa Rule of Civil Procedure 1.1007 requesting additional time to file post-trial motions. It stated it intended "to file one or more motions pursuant to [rule] 1.904 and/or 1.004 (sic)" and gave reasons it asserted were good cause for the extension. Neither the Bentleys nor the Halvorsons filed a resistance, and the court on March 17, 2015, entered its order granting the motion, extending the deadline for post-trial motions for all parties to April 17, 2015.

         On April 17, 2015, the Bank filed its rule 1.904(2) motion challenging the court's findings and conclusions.[2] Among other things, it argued the court erred in ignoring its evidentiary objections under the parol evidence rule and "in imposing a warranty of an easement upon the parties which the parties at the time of the [warranty deed] did not agree upon." The Bentleys filed their resistance to the motion on April 27, 2015, which asserted, among other things, that the Bank's motion was "a poorly written, hurried and confused scattergun-shot of supposed judicial errors, presenting no persuasive argument to change the basis for the [district court's] award of damages." The Halvorsons did not respond. On May 1, 2015, the court denied the Bank's motion.

         The Bank filed its notice of appeal on May 20, 2015. The Bentleys filed their notice of appeal the next day. On its own motion, the Iowa Supreme Court determined the Bentleys' notice should be treated as a notice of cross-appeal. It subsequently transferred the case to this court in May 2016, and it was submitted following oral argument in November 2016.

         IV. Scope and ...

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