FIRST AMERICAN BANK and C.J. LAND, L.L.C., Appellees,
FOBIAN FARMS, INC.; HOOVER HIGHWAY BUSINESS PARK, INC.; and GATEWAY, LTD., Appellants.
review from the Iowa Court of Appeals.
from the Iowa District Court for Johnson County, Ian K.
seek further review of court of appeals decision affirming
district court's ruling on remand imposing sanctions
under Iowa Rule of Civil Procedure 1.413. DECISION OF
COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED AS
MODIFIED, WRIT SUSTAINED, AND CASE REMANDED.
A. Geerdes, Iowa City, for appellants.
A. Roberts, Lynn W. Hartman, and Dawn M. Gibson of Simmons
Perrine Moyer Bergman P.L.C., Cedar Rapids, for appellees.
case, we must determine whether the district court abused its
discretion by awarding attorney fees and expenses of $145,
427 as a sanction for frivolous court filings in violation of
Iowa Rule of Civil Procedure 1.413. The court of appeals
affirmed the sanction award after the district court made
more specific factual findings on remand following that
appellate court's first decision affirming in part the
rulings in a quiet-title action. The sanctioned parties took
unfair advantage of a scrivener's error platting a
commercial development. The opposing parties largely
prevailed in protracted litigation to reform the title
documents and incurred substantial legal fees opposing
frivolous claims and defenses asserted by the sanctioned
parties. The prior proceedings resolved the underlying
boundary disputes and established that the sanctioned parties
violated rule 1.413. All parties agree at this late stage
that a sanction in some amount is warranted; we
granted the sanctioned parties' application for further
review to decide whether the amount awarded was excessive.
All parties request that our court determine the final amount
of the sanction rather than remanding the case to the
district court for a third determination and possible new
reasons explained below, we hold the district court abused
its discretion by awarding attorney fees beyond those caused
by the violations of rule 1.413 or necessary to deter similar
misconduct and by relying on a letter the sanctioned
party's president sent to our court after we denied
further review of the first appellate decision. We determine
that the appropriate sanction is $30, 000. We vacate the
decision of the court of appeals and modify the district
court's sanction award accordingly.
Background Facts and Proceedings.
underlying quiet-title litigation involves a real estate
development in Johnson County known as the Gateway Commercial
Condominiums. Jerry L. Eyman was president of Gateway, Ltd.
(Gateway), the developer. In the original 1999 plat, two
units were oriented in an east-west configuration, with unit
2A west of unit 2B. The 1999 plat was amended in 2007 to
provide for a north-south configuration of building 2. While
the units in all other buildings in the development were
aligned alphabetically from north to south, the units of
building 2 through a scrivener's error were mistakenly
aligned with unit 2A south of unit 2B.
Fobian, president of Fobian Farms, Inc., saw an opportunity.
Left uncorrected, the scrivener's error could and did
lead to the construction of a building on a site subject to
Fobian's mortgage. Fobian had previously extended loans
to Eyman and Gateway secured by a mortgage on unsold
buildings. Fobian recorded the mortgage on May 16, 2007.
Fobian's mortgage was junior to two previously recorded
mortgages held by Hills Bank and Trust Company (Hills Bank).
In June 2008, Eyman asked Fobian to sign a partial release so
C.J. Land, L.L.C. could buy a unit. When Carl Fobian signed
the partial release on June 17, 2008, he knew C.J. Land
intended to purchase the site to build a restaurant. The
partial release, which released unit 2B from the second
mortgage, referenced the 1999 plat-not the 2007 plat.
that month, C.J. Land recorded a warranty deed from Gateway.
First American Bank financed the purchase. C.J. Land
specifically negotiated for the southern lot for highway
access, yet the deed stated it was for unit 2B, which was
identified as the north lot in the 2007 plat. The deed,
however, referenced the legal description from the 1999 plat,
which showed 2B as the east unit. Both C.J. Land and Eyman
believed C.J. Land purchased the south unit of building 2.
C.J. Land hired Eyman as the general contractor to build the
restaurant there. The restaurant was built one foot over the
property line, and a meat smoker and air conditioning units
were placed over the line. The restaurant, which cost
approximately $1.1 million to construct, was substantially
completed by July 31, 2009.
defaulted on the mortgages secured by the unsold units in the
development. Hills Bank commenced a foreclosure action,
naming Fobian Farms as a defendant due to its junior
mortgage. Fobian Farms purchased the bank's interest and
prosecuted the foreclosure action. On July 6, 2010, Fobian
Farms through a credit bid purchased the sheriff's deed
to the unsold property in the development. The sheriff's
deed referenced the 1999 plat without referring to the 2007
20, Fobian Farms and C.J. Land entered into a lease agreement
allowing C.J. Land to use an unsold lot for overflow parking.
In return, C.J. Land agreed to maintain and insure the
parking lot. Carl Fobian kept quiet about the scrivener's
error or his plan to claim ownership of the restaurant site.
week later, Fobian Farms' attorney sent C.J. Land's
attorney a letter stating that Fobian Farms owned the south
lot on which the restaurant was built. This was the first
time C.J. Land learned of the dispute. Eyman later testified
he became aware of the scrivener's error- in which units
2A and 2B were "flipped"-only when Carl Fobian told
him in late July.
30, the land surveyors who had prepared and filed the 2007
plat filed an affidavit acknowledging the scrivener's
error, explaining, "[T]he north unit of building 2
should be 2A not 2B; the south unit of
building 2 should be 2B not 2A." After
the correction of the scrivener's error, First American
Bank contacted Fobian Farms to resolve the title defect, but
Fobian Farms refused to cooperate.
next year, Fobian Farms sued the surveyors for disparagement
or slander of title challenging the corrective affidavit the
surveyors had filed. In September 2011, the surveyors
responded to the lawsuit by filing an "explanatory and
corrective surveyors' affidavit" to "withdraw,
negate, and void the [original] Affidavit . . . and return
the Unit numbering to the state in which it existed prior to
execution and recording of that Affidavit." Based on the
surveyors' capitulation, Fobian Farms dismissed its
lawsuit against them.
March 7, 2012, First American Bank and C.J. Land filed this
civil action to quiet title and reform the mortgage and
deeds, naming as defendants Fobian Farms; Hoover Highway
Business Park, Inc. (Hoover); Gateway and Gateway Properties,
Ltd.; Gateway Commercial Condominium Owners Association;
Jerry Eyman; and Jan Eyman. Fobian Farms filed a counterclaim
against C.J. Land alleging interference with a prospective
business advantage by building upon land it did not own.
Fobian Farms also filed a cross-claim against Jerry Eyman
asserting negligent misrepresentation, a cross-claim against
Gateway Commercial Condominiums Owners Association alleging
interference with a prospective business advantage, and a
third-party claim against Hills Bank alleging negligent
misrepresentation. C.J. Land and Hills Bank filed motions for
summary judgment and for sanctions against the defendants. On
January 24, 2013, the district court granted summary judgment
dismissing Fobian Farms' counterclaim against C.J. Land
and the third-party claim against Hills Bank.
three-day bench trial commenced on February 5 on the
remaining claims. Eyman testified that he intended to sell
the south unit to C.J. Land and believed he had done so
because he did not realize the amended plat incorrectly
labeled unit 2B as the north unit. C.J. Land's president
similarly testified that he intended to purchase the south
unit and had "no doubt" he had done so when he
purchased unit 2B. Eyman also testified that Fobian
approached him in June 2011 with Fobian's strategy for
obtaining the building on the restaurant site. Fobian
indicated that he would forgive a large part of Eyman's
debt if Eyman cooperated, but Eyman refused.
attorney, James Keele, testified that he and Carl Fobian
discovered C.J. Land had built the restaurant before Fobian
Farms purchased the mortgages from Hills Bank and completed
the sheriff's sale. Keele also testified that he did not
inspect the property, explaining that neither he nor Fobian
were concerned that someone else had an ownership interest in
the property. Fobian testified that he saw C.J. Land
constructing the restaurant on the wrong site but said
nothing because "[i]t was not [his] business. If they
wanted to improve [his] equity, that was none of [his]
business." When asked if he would "ever have
taken the place of the first mortgag[ee] if that building
wasn't on [his] land, " Fobian replied,
posttrial brief filed in March, First American Bank and C.J.
Land requested costs and attorney fees under Iowa Code
sections 649.4 and 649.5, without citing Iowa Rule of Civil
August 28, the district court issued its ruling. The district
court found that Eyman had credibly testified about his
intention to sell the south unit of building 2, that the
surveyors had inadvertently switched the numbering of
building 2A and 2B on the 2007 plat, and that Eyman and C.J.
Land were unaware of the scrivener's error at the time of
the sale. The court also specifically found the testimony of
Fobian's attorney, Keele, not credible. The district
court quieted title in favor of C.J. Land, subject to First
American Bank's mortgage, and ordered reformation of
related legal instruments. The district court awarded Fobian
Farms $2101 in damages for encroachments by C.J. Land's
district court ordered First American Bank and C.J. Land to
"submit a written request specifying the amount of costs
and attorney fees they seek in conjunction with the claims
they have successfully stated in this matter." Motions
to enlarge and amend were filed, and First American Bank and
C.J. Land also filed an application for attorney fees and
expenses, this time citing both Iowa Code section 649.5 and
Iowa Rule of Civil Procedure 1.413. First American Bank and
C.J. Land requested $135, 917 in attorney fees, $7094.53 in
expenses, and $2636.44 in expert expenses. This request was
supported by affidavits and the law firm's billing
records, which show those parties incurred approximately $21,
000 in fees before Fobian Farms filed its answer,
counterclaim, cross-claims, and third-party claim. The
records also show they incurred approximately $11, 300 in
fees responding to Fobian Farms' counterclaim against
C.J. Land and third-party claim against Hills Bank, which
were dismissed by summary judgment on January 24, 2013.
February 11, 2014 ruling, the district court assessed
attorney fees and expenses against Fobian Farms. While noting
that Iowa Code section 649.5 limited the award of attorney
fees to forty dollars,  the court concluded that Iowa Rule of
Civil Procedure 1.413 provided another basis for awarding
attorney fees as a sanction:
The Court's Trial Ruling supports a finding that the
actions taken by the Fobian Parties in defending against
Plaintiffs' claim and in filing their own claims were
frivolous and used for an improper purpose. It is clear to
the Court . . . that the actions of the Fobian Parties in
defending against Plaintiffs' claims and asserting the
Fobian Parties' own claims were of the type that Rule
1.413 was intended to address. Based on the Court's
assessment of the testimony offered at trial, there is a high
likelihood that the Fobian Defendants saw the mistake in the
property descriptions as an opportunity to get a free
restaurant. Rather than work with Plaintiffs to rectify the
mistake before this litigation was filed, the Fobian
Defendants instead chose to pursue improper claims that
delayed this process and wasted the resources and time of the
parties, and required the use of extensive resources by the
Court to resolve the issues presented by this action. As
applied to the Fobian Defendants, Rule 1.413 provides a basis
for recovery of attorney fees by Plaintiff under these facts.
district court determined that all fees requested by the
plaintiffs were reasonable and concluded the plaintiffs were
entitled to $135, 696 in attorney fees, $7095 in expenses,
and $2636 in expert expenses for a total sanction of $145,
427. The court set off taxes owed by C.J. Land to Fobian
Farms of $36, 643, for a net award of $108, 784. Fobian Farms
appealed, and we transferred the case to the court of
appeal, Fobian Farms argued the district court erred in
assessing any sanctions and, alternatively, that any
sanctions "should have been assessed against Fobian
Farms' trial counsel only." First American Bank and
C.J. Land, however, argued that sanctions were properly
assessed against the Fobian parties.
June 10, 2015 decision, the court of appeals affirmed the
district court's reformation ruling quieting title and
its award in favor of Fobian Farms for encroachment. The
court of appeals quoted the district court's finding that
[t]he Fobian Parties either knew that C.J. Land began
constructing the restaurant on a parcel owned by Fobian
Parties and said nothing, or later discovered the mistake and
[sought] what would amount to a free restaurant. It is
undisputed that Mr. Fobian saw the restaurant construction
and made no objection during the construction. At best, Mr.
Fobian's conduct could be characterized as inequitable
and unfair, and his failure to act at the time the restaurant
was being constructed estops him and his business entities
from complaining about any resulting encroachment.
court of appeals also affirmed the district court's
determination that Fobian Farms violated rule 1.413(1),
noting that "Fobian bullied the surveyors [who had
corrected the scrivener's error] with litigation until
they recanted their affidavit" and "asked Eyman to
help him with his improper plan of claiming ownership of the
restaurant" in exchange for a reduction in Eyman's
outstanding debt, while attempting to "make someone
pay" for the scrivener's error. But the court of
appeals concluded the district court failed to make specific
findings to support the amount of the sanctions or its
allocation. The court of appeals explained that
[s]ome time would have been expended on this suit
notwithstanding the actions of Fobian, and there is no
explanation of how much approximated time was expended by the
plaintiffs' counsel to address any unwarranted claim or
pretrial proceedings, or any needless extension of the time
the court of appeals remanded the case "to the district
court to make the required specific findings and reconsider
the amount of sanctions awarded."
Farms filed an application for further review on four issues,
[w]hether a titleholder who is in the business of selling
real estate should be subject to sanctions under Iowa Rule of
Civil Procedure 1.413 if he asserts a counterclaim for
interference with prospective business advantage against a
nontitleholder who has constructed a building and otherwise
encroached on the counterclaimant's real property.
denied further review on July 31, 2015.
August, Carl Fobian sent a letter to our court, purportedly
to request advice on "where to turn for real justice and
a rapid conclusion." His letter stated,
I have three separate issues concerning Johnson County, the
State, and our court operation or lack of it. This concerns
an action we should never have been allowed to be named in as
"defendants". We have lost in a bench court, an
appeals court rubber-stamped it, and the Supreme Court has
denied the review of the case or suggests any solution. We
expected a decision on legal terms we did not
get and asked it to be reviewed on this basis by the
Supreme Court. They have refused.
. . . .
Can a determination by a lower court be allowed to stand on
totally false facts, easily disapproved by available
recorded data, then the Supreme Court denying it to
be heard? Can a surveyed document, since recorded, approved
by all seven offices in the county, after being requested and
presented by the then owner and developer of same when thus
recorded, then being used and accepted as security on a
properly recorded mortgage be ignored and disposed of by a
judge? I can't believe it can. The judge used false facts
of record stating we owned property when we were only
mortgage owners at that time and that we were obtaining
"free property" that our money had
financed and was our security on this mortgaged
property. He simply did not understand real estate law and
our attorney had his mind elsewhere on his own troubles.
. . . .
Can a court get by with, as it seems to me, assisting a
person in creating a scam, using a shell-game, replacing,
moving, removing, and selling recorded mortgaged property,
not released, encroaching, ruining the value there of?
. . . .
Is this America? We positively did nothing wrong, yet we now
face the loss of money we borrowed, loaned out, lawyer fees,
receiving no damage awarded for a ruined lot, a life
destroyed all with the assistance of the court.
C.J. Land and First American Bank filed a motion to strike
the filing of the letter. On December 18, we granted the
motion to strike and directed the clerk to issue procedendo.
January 15, 2016, the district court directed the parties to
submit briefs addressing the issues of the minimum sanction
needed to deter and Fobian Farms' ability to pay the
award previously ordered. In March, the district court
entered its ruling on remand, which reinstated the full
amount of the sanctions originally awarded before the first
appeal. This ruling relied in part on Carl Fobian's
letter to our court to justify the amount awarded. Fobian
Farms timely appealed the ruling on remand, and we again
transferred the case to the court of appeals, which treated
the appeal as a writ of certiorari, found no abuse of
discretion, and annulled the writ. Fobian Farms applied for
further review, which we granted.
Standard of Review.
treat this appeal as a petition for writ of certiorari.
Everly v. Knoxville Cmty. Sch. Dist., 774 N.W.2d
488, 492 (Iowa 2009) ("The proper means to review a
district court's order imposing sanctions is by writ of
certiorari."); see Iowa R. App. P. 6.108.
"We review a district court's order imposing
sanctions under our rules of civil procedure for an abuse of
discretion." Rowedder v. Anderson, 814 N.W.2d
585, 589 (Iowa 2012). A district court abuses its discretion
when it "exercises its discretion on grounds or for
reasons clearly untenable or to an extent clearly
unreasonable." Id. (quoting Schettler v.
Iowa Dist. Ct., 509 N.W.2d 459, 464 (Iowa 1993)).
"An erroneous application of the law is clearly