from the Iowa District Court for Polk County, David M.
Properties, LLC, appeals from the district court's
adverse ruling on cross-motions for summary judgment in its
suit against St. Croix Hospice, LLC.
J. Dalton of Dalton Law, PLC, Urbandale, and David L. Wetsch
of Wetsch, Abbot, Osborn, PLC, Des Moines, for appellant.
K. Franklin and Elizabeth R. Meyer of Davis Brown Law Firm,
Des Moines, for appellee.
by Danilson, C.J., Potterfield and Doyle, JJ.
DANILSON, Chief Judge.
Properties, LLC (JAKS) appeals from the district court's
adverse ruling on cross-motions for summary judgment in its
suit against St. Croix Hospice, LLC (St. Croix). We conclude
St. Croix did not waive arbitration procedures, St. Jude
Healthcare, LLC (St. Jude) is a necessary party to this
action, and the proper relief for failing to bring in a
necessary party is for the court to order the party brought
in. Because the court dismissed the action, we reverse.
Background Facts and Proceedings.
an action filed pursuant to Iowa Code sections 626.33 and
626.34 to require a determination of the nature and extent of
a third party's interest in monies in an escrow account
for purposes of enforcing a judgment lien arising from the
third party's confession of judgment. What initially was
a landlord-tenant relationship between the first two
"players" identified below became a much more
complicated contractual relationship between all three
"players." After the initial lease agreement, a
sublease of a portion of leased property was executed, and
two of the players, St. Jude and St. Croix, entered into an
asset purchase agreement and an escrow agreement. In short,
JAKS seeks some of the monies existing in the escrow account
for payment on its judgment.
JAKS is the successor in interest to the rights of Park
Avenue Partners 2 L.C. (Park Avenue) and is the owner of a
large commercial office building we will refer to simply as
Jude entered into a ten-year lease (Master Lease) for 13, 710
square feet of Crossroads on July 16, 2014. St. Jude is not a
party to this action.
Croix entered into a May 19, 2015 sublease with St. Jude for
3808 square feet of Crossroads (the Urbandale Sublease).
Croix and St. Jude enter an asset purchase agreement. On
May 21, 2015, St. Croix (as buyer) entered into an asset
purchase agreement with St. Jude (as seller). Section 9
provided Delaware law governed the agreement and required
"[a]ny dispute, controversy or claim arising out of or
relating to this agreement or any transaction document, or
the breach thereof" was to be settled by binding
10.1(b) of the asset purchase agreement states:
Subject to the other provisions of this Article 10 [relating
to indemnification], after the closing, [St. Jude] and the
equity holders, jointly and severally, agree to indemnify and
hold [St. Croix and its managers, members, officers,
directors, partners, affiliates, agents, successors, and
assigns] harmless from any and all losses . . . (iv) based
upon, attributable to or resulting from or related to the
excluded liabilities and the excluded assets.
2.4 of the asset purchase agreement defined "excluded
liabilities." Pertinent portions of that section
Except as and to the extent that specifically set forth in
section 2.3, [St. Croix] shall not assume by virtue of this
agreement . . . and shall have no liability for, any
liabilities, duties, responsibilities or other obligations of
[St. Jude] . . . including, without limitation . . . (h) any
liabilities with respect to the Master Lease underlying the
Urbandale Sublease (other than with respect to the Urbandale
Sublease) . . . . The excluded liabilities and excluded
assets shall be and remain the responsibility of [St. Jude].
In the case of any amount payable to any indemnified party
pursuant to Article 10 hereof, the indemnified party shall
forward to the indemnifying party notice of any sums due and
owing by the indemnifying party pursuant to this agreement
with respect to such matter and the claim shall be satisfied
(i) In the case of any amount payable to [St. Croix and its
managers, members, officers, directors, partners, affiliates,
agents, successors, and assigns], (i) such amount shall first
be satisfied subject to the provisions of the escrow
agreement, from the escrow amount . . . .
escrow agreement. The escrow agreement with an escrow
fund of $900, 000 was executed on May 21 as well. Section
3.1.4 provides, in part:
[I]f on or before the final disbursement date, the escrow
agent shall have received from [St. Croix] written notice of
any pending claim or claims for indemnification pursuant to
Article 10 of the purchase agreement (an "open claim
notice"), the escrow agent shall reserve within the
escrow fund, and withhold from disbursement to the
representative . . . the amount specified in such open claim
notice for so long as the open claim notice has not been
withdrawn by [St. Croix] . . . .
Section 9.5.2 of the escrow agreement, "Any dispute,
controversy or claim arising out of or relating to this
escrow agreement, or the breach thereof, shall be settled by
binding arbitration" in Delaware, and "[t]he
parties and the escrow agent hereby irrevocably and
unconditionally submits, for itself and its property, to the
exclusive jurisdiction" of the courts in the state of
10.4 provides, "This escrow agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their
successors and assigns, except as is expressly provided to
consent to sublease. Also on May 21, 2015, Raymond
Gazzo, as managing member of Park Avenue, executed a consent
to St. Croix's sublease of a portion of Crossroads,
subject to the following conditions:
(1) The lessee as well as the sub-lessee shall remain liable
to the lessor for all of the lessee's duties under the
(2) This consent to sublease shall permit the lessee to
sublease to the sub-lessee and to no other person or entity
and is not a continuing consent to sub-lease in the event the
sub-lease to the sub-lessee is terminated, and the lessee and
sub-lessee are prohibited from further sub-leasing all or
portion of the premises without the express written consent
of the lessor.
(3) The lessee's sub-lease to sub-lessee shall obligate
sublessee to adhere to all of the lessee's duties under
the lease any breach of which by lessee or sub-lessee shall
be a basis for lessor's remedies set out in the lease
against both the lessee and sub-lessee.
November 19, 2015, Park Avenue sold Crossroads to JAKS and
assigned St Jude's lease to JAKS.
Croix placed $900, 000 into the escrow fund. Pursuant to the
escrow agreement, an initial disbursement of $360, 000 was
made to St. Jude on November 21, 2015.
20, 2016, JAKS sent a notice of default and opportunity to
cure and an accompanying letter to St. Croix and St. Jude in
which it stated St. Jude "has failed to make its May
rent payment to JAKS and has further informed JAKS that it is
insolvent and does not expect to satisfy future rent
obligations." Further, the notice stated:
St. Croix is a co-obligor of all lessee obligations under the
[Master] Lease. St. Croix is therefore responsible for any
default in nonpayment of rents or other lessee obligations
under the lease. Any limitation of liability among and
between St. Croix and St. Jude under the [Urbandale] Sublease
has no bearing on your common obligations to JAKS under the
JAKS informed St. Croix and St. Jude of a thirty-day
opportunity to cure the default. If not cured, "JAKS
will then pursue legal action against St. Croix and St. Jude
to collect past and future rents, costs of securing a
substitute tenant (including Tl build-out costs and broker
fees), liquidated damages under the [Master] Lease, property