Opinion
No. 4-415 / 03-1582.
September 29, 2004.
Appeal from the Iowa District Court for Linn County, Larry J. Conmey, Judge.
David DeSotel appeals from the district court's adverse rulings in a quiet title action. REVERSED AND REMANDED WITH INSTRUCTIONS.
John Monroe of Titler Monroe, Cedar Rapids, for appellant.
Tom Riley of Tom Riley Law Firm, Cedar Rapids, for appellees.
Considered by Vogel, P.J., and Hecht and Vaitheswaran, JJ.
I. Background Facts and Proceedings.
The parties to this appeal were family by marriage on April 29, 1977 when they entered into (1) a contract for the lease of a parcel of land, and (2) a separate contract for the purchase of a home to be constructed on the leased parcel. Boyd and Bernita Jacobs, with the express wish to provide a home for their daughter Nancy, and her then-husband David DeSotel, agreed to lease the parcel located adjacent to the Jacobs' homestead, and borrowed $18,000.00 to purchase the building materials for the home. Boyd and his son, Bill Jacobs, eventually constructed the home with some aid from David.
Noteworthy terms of the two intertwined contracts were (1) the lease for the parcel was to run for fifty years (April 1, 1978 to March 31, 2028) with rents to be paid on a monthly basis; (2) the amount of the monthly payments to be made by David and Nancy to the Jacobs would equal the monthly payments owed by the Jacobs on the mortgage loan they incurred for the purchase of the building materials, plus the real estate taxes incurred by the Jacobs during the term of the lease; and (3) the real estate sale contract provided the Jacobs an option to repurchase the home for $18,000.00 if the DeSotels chose to sell it. Although the lease agreement was recorded, the contract for the purchase of the home was never recorded and is now lost to all parties.
The DeSotels lived in the home on the leased parcel until March 1984, when they divorced. The dissolution decree authorized Nancy to maintain possession of the home and leased premises until David's child support obligation terminated, at which time the proceeds from the disposition of the home, if sold, would be divided by the DeSotels. The dissolution decree obligated Nancy to make the monthly contract payments, but she and David retained joint ownership of the home. Nancy failed to make any payments on the contracts after April of 1984, and subsequently vacated the premises and moved to Georgia. The rent on the leased parcel, equal to the taxes and insurance on the leased property, was not paid by the DeSotels after 1978.
In November 1985, the Jacobs' lawyer sent a letter to David notifying him of Nancy's vacation of the premises and her subsequent failure to pay either the rent or the monthly house payment. The letter informed David that the Jacobs considered the lease terminated and the contract for the purchase of the home accelerated as a consequence of the DeSotels' non-performance, and offered to settle the matter through the exercise of their option to repurchase. No settlement was reached and no forfeiture or foreclosure proceedings were instituted against David until the commencement of this action. Following the receipt of the 1985 letter, David attempted to winterize the vacant home in anticipation of the winter of 1985-86, but his attempt failed, resulting in about $1,200.00 dollars in water-related damage to the home.
Bernita Jacobs testified that she considered the contract and lease to be in full force as of February of 2001, the time at which Nancy transferred her entire interest in the property to the Jacobs.
The Jacobs, desiring to maintain and protect the home for their daughter and grandchildren, entered into an agreement with Nancy on March 15, 1986. Nancy assigned her possessory interest in the property to the Jacobs for a term of ten years in lieu of payments under the lease and contract.
Meanwhile, David did not make payments from the time of the dissolution until the summer of 1986, when he tendered only three monthly payments. The Jacobs returned two payments to David with a note that read: "The July and August (1986) house payments have been taken care of by Nancy (DeSotel) White." The note did not inform David that the Jacobs had taken possession of the premises and had leased them to third-party sublessors, pursuant to the March 1986 agreement with Nancy, in lieu of payments on both the real estate contract and lease.
David actually tendered to the Jacobs seven payments, each in the amount of $159.07. Of these payments, two checks did not clear due to insufficient funds, three checks cleared and were treated by the Jacobs as reimbursement for expenses accrued as a result of David's failed winterizing attempt in 1985, and two payments were returned by the Jacobs to David.
David also attempted to assert his interest in the property by filing an application to modify the dissolution decree in 1987. David's application alleged Nancy's failure to occupy the family residence constituted a changed circumstance necessitating modification of the dissolution decree's disposition of the home. The Jacobs intervened in the modification action and opposed modification, contending their 1986 agreement with Nancy would avoid foreclosure or forfeiture of the 1977 contract. The district court denied David's request for modification of the dissolution decree. David did not appeal.
The Jacobs continued thereafter to rent the property to third parties and collect rents. The mortgage securing the Jacobs' loan for the acquisition of the building materials was satisfied in 1990. Although the March 1986 agreement between the Jacobs and Nancy was for a term of ten years, the Jacobs continued after 1996 to possess the property and collect rents. In February of 2001, Nancy agreed to transfer her ownership interest in the property to the Jacobs. Although the agreement required them to pay $9,000.00 as consideration, no payment was actually made by the Jacobs to Nancy.
In her testimony before the district court, Bernita Jacobs apparently could not remember the total amount of rent received pursuant to the 1986 agreement. We find no evidence in the record establishing the amount of rent collected by the Jacobs.
Because the record does not include an accounting of the rents received by the Jacobs since 1986, we are unable to determine whether, or to what extent, the rents exceeded the contract and lease payments owed by David and Nancy to the Jacobs.
The Jacobs made a similar offer in the same month to David to acquire his undivided one-half interest in the property for $9,000.00. David responded that he did not want to talk to the Jacobs. This quiet title action was then filed by the Jacobs who claimed title should be quieted in them because David abandoned the property and breached the contract. David counterclaimed, seeking to (1) quiet title in him, (2) force the purchase of his one-half undivided interest, and (3) obtain an accounting of all rents collected since the Jacobs took possession in 1986.
The district court quieted title in the Jacobs. The court found David had abandoned the property by his failure to timely make the contract payments, maintain an interest in the premises, and exercise his rights in the property. The district court further concluded David's interest in the property should be extinguished consistent with the equitable principles of estoppel by acquiescence and laches. David appeals, challenging the decision quieting title in the Jacobs and the inclusion of the cost of one deposition in the costs taxed against him.
II. Scope and Standard of Review.
An action to quiet title to real property is an action in equity. Moser v. Thorp Sales Corp., 312 N.W.2d 881, 886 (Iowa 1981). As such, we review the district court's judgment in quieting title in the Jacobs de novo. Id. III. Discussion. A. David's Abandonment.
Abandonment is the intentional relinquishment of a known right and involves both intent and some act by which the intent is carried into effect. Pearson v. City of Guttenburg, 245 N.W.2d 519, 529 (Iowa 1976); Ward v. Incorporated Town of Clover Hills, 240 Iowa 900, 905, 38 N.W.2d 109, 112 (1949). The act of relinquishment must be clear and unequivocal. Ward, 38 N.W. 2d at 112. Further, it is well settled that, like a valid waiver of a right, the abandonment must be voluntary to be effective against the right-holder to the property. Novotny v. Horecka, 200 Iowa 1217, 1219, 206 N.W. 110, 112 (1925).
The Jacobs alleged and the district court found that David abandoned the contract and lease by his failure to assume possession, make contract and lease payments, and by his statement that he "was not interested" upon being offered $9,000.00 for his undivided one-half interest in the home. After our de novo review of this case, we conclude that these proofs, taken together, do not establish an abandonment of the contract or the lease by David.
In Lake v. Berstein, 215 Iowa 777, 246 N.W. 790 (Iowa 1933), our supreme court found a vendee abandoned his interest in a contract for the sale of real estate There, the vendee had (1) testified he would not perform on the contract; (2) testified in his divorce action that he owned no interest in the property; and (3) "after refusing to pay the balance on the real estate contract purchase price, made no claim for the property, or the $1,200 paid under the contract, for a period of approximately two years." Lake, 215 Iowa at 782-83, 246 N.W. at 793. The court found both a clear, stated intent to abandon the contract for the sale of the land, and actions consistent with that intent. Id. 215 Iowa at 783, 246 N.W.2d at 794. In the case before this court, the dissolution decree ordered Nancy to make the contract and lease payments. And while it is clear that Nancy failed to make contract and lease payments, it is conceivable that her obligations to the Jacobs under those agreements were completely fulfilled from lease revenues derived by the Jacobs since March of 1986. As noted above, we are unable on this record to make such a determination. However, to the extent that Nancy's obligations under the contract and lease were thus fulfilled, David's were as well. Even if it were assumed that the rent received by the Jacobs since March of 1986 was insufficient to fully pay the DeSotels' lease and contract obligations to the Jacobs, David's " mere failure to pay the purchase price, as provided by a real estate contract, [did] not in itself work a forfeiture or an abandonment." Lake, 215 Iowa at 785, 246 N.W. at 794 (emphasis supplied).
The Jacobs have the burden to establish David's voluntary abandonment. Fulton v. Chase, 240 Iowa 771, 774, 37 N.W.2d 920, 922 (Iowa 1949). We acknowledge that beyond his failed attempt to winterize the house in the fall of 1985, his attempt to make contract payments in the summer of 1986, and his unsuccessful application to modify the disposition of the property under the dissolution decree, David has shown very little interest in the property. However, we attribute much of his inactivity to the fact that the dissolution decree gave David no right to possess the property so long as he had a child support obligation, and to the apparent mutual lack of affection between himself and the Jacobs. Moreover, our disposition of the abandonment issue is strongly influenced by David's attempts to make contract payments in 1986 after receipt of a notice of breach from the Jacobs' lawyer, and by the Jacobs' response to those attempts.
For their part, the Jacobs failed to take legal action against David for breach of the lease and contract, choosing instead to rent the property in fulfillment of the monies owed them under the contract. As noted above, Bernita Jacobs returned two of the payments to David with a note stating that Nancy had taken care of the payments owed for July and August of 1986. Our decision is also heavily influenced by the fact that there is no evidence in the record that David was informed of the March 1986 agreement giving possession of the home to the Jacobs in lieu of contract payments. Nor is there evidence in the record tending to prove that, after accepting some payments from David in 1986 and returning others to him with the assurance that payments had been "taken care of" by Nancy, the Jacobs ever again notified David of a claim of his default. We find it was reasonable under the circumstances for David to believe the contract and lease were no longer in breach on the strength of the Jacobs' representation that Nancy had "taken care of" the payments for July and August of 1986.
The district court apparently found significant David's failure to take affirmative action in 2001 in response to the Jacobs' settlement offer, after termination of his child support obligation, as inconsistent with his continuing ownership interest in the property. The Jacobs' appellate brief asserts David's unwillingness to talk to them evidences intent to abandon. We disagree. We find it more plausible that the substance of the Jacobs' offer and the estrangement of the parties were the principal factors motivating David's conduct. On de novo review, we find the Jacobs failed to meet their burden to prove David's abandonment and therefore reverse on this issue.
B. Laches and Estoppel by Acquiescence.
The district court additionally relied upon the theories of laches and estoppel by acquiescence in support of its decision that David's ownership interest in the property was extinguished. The principle underlying both theories is that one who fails to assert a known right for some unreasonable length of time is prevented, in equity, from relying on that right to defeat another's claim. The distinction between the two equitable doctrines is nuanced; laches focuses on the effect the delay has on the party claiming the defense while estoppel by acquiescence focuses on whether the actions or the inaction of one who claims a right can be construed as a waiver of that right. Davidson v. Lengen, 266 N.W.2d 436, 439 (Iowa 1978).
A court in equity will only find laches from a belated claim where the party asserting the defense has been prejudiced by the delay. Id.; Gord v. Iowana Farms Milk Co., 245 Iowa 1, 19, 60 N.W.2d 820, 830-31 (Iowa 1953); see also Cullinan v. Cullinan, 226 N.W.2d 33, 36 (Iowa 1975) (requiring material prejudice be proven to establish a laches defense). When a party, in defense of a claim, asserts laches, it is that party's burden to establish prejudice by clear and convincing evidence. Henderson v. Millis, 514 N.W.2d 497, 505 (Iowa 1985).
We note the district court made no finding that David's delay in asserting his interest in the property materially harmed or prejudiced the Jacobs. As noted above, the record does not include an accounting of the rental income received by the Jacobs since March of 1986 and we are therefore unable to determine whether David's lease and contract obligations have been fully satisfied. The 1986 agreement by which the Jacobs obtained possession of the property was to terminate in 1996, but the Jacobs continued thereafter to receive income from the rental of the property. The record does establish that the mortgage securing the Jacobs' loan to acquire the building materials was satisfied in 1990. Upon our de novo review, we find the Jacobs failed to prove prejudice by clear and convincing evidence as a consequence of David's failure to assert his claim at an earlier time, and thus we conclude the doctrine of laches does not support the district court's decision to quiet title in the Jacobs.
Estoppel by acquiescence, as noted above, does not turn on the prejudice suffered due to a party's unreasonable delay in asserting a right, but rather focuses on whether the actions or inaction of the right-holder indicate an intention to waive the right. This branch of estoppel law applies "where a person knows or ought to know that he is entitled to enforce his right . . . and neglects to do so for such a length of time as would imply that he intended to waive or abandon his right." Humboldt Livestock Auction, Inc. v. B H Cattle Co., 261 Iowa 419, 432, 155 N.W.2d 478, 487 (Iowa 1967). Here again, it is the burden of the party advancing the estoppel theory to prove the intent to waive by clear and convincing evidence. Henderson, 514 N.W.2d at 505. Where acts and conduct are relied upon as proof of waiver, the intention of the party charged with waiver must clearly appear. Continental Cas. Co. v. G.R. Kinney Co., 258 Iowa 658, 660, 140 N.W.2d 129, 130 (Iowa 1966).
The Jacobs have also failed to meet their burden of proof on this issue. David did take actions, after the 1985 letter from Jacobs' counsel, consistent with those taken by one who maintains an interest in the property. In particular, he attempted unsuccessfully to winterize the property in 1985, he tendered some contract payments in the summer of 1986, and he attempted to modify the dissolution agreement as it pertained to possession of the home in 1987 after Nancy had moved to Georgia. The proof of David's intention to waive his ownership interest in the property is further weakened by the actions taken by the Jacobs. After their counsel sent the letter to David in November of 1985 claiming breach of the lease and contract, the Jacobs delayed action against David on the agreements until this quiet title action was instituted more than a decade later. Moreover, the Jacobs were less than forthcoming in 1986 when they failed to disclose to David they were in possession of the property in lieu of further contract payments pursuant to the March 1986 agreement with Nancy. There is no evidence in this record tending to prove the Jacobs disclosed to David the amount of rent they collected pursuant to the 1986 agreement and the amount, if any, by which those rents exceeded the DeSotels' obligations under the lease and real estate contract. "Parties whose misleading tactics, concealments, misrepresentations and defaults exacerbate the situation cannot invoke estoppel and laches." Moser, 256 N.W.2d at 908. A party seeking equity must come with clean hands. Kimm v. Kimm, 564 N.W.2d 468, 474 (Iowa Ct.App. 1990). As we are convinced that the actions of the Jacobs motivated at least in substantial part the timing of David's assertion of his rights in the property, equitable principles do not persuade us to find David intended to waive his claim of an ownership interest.
We therefore reverse the district court's determination that laches and estoppel by acquiescence support the quieting of title in the Jacobs.
C. Taxation of the Hatch Deposition.
In light of its ruling quieting title to the property in the Jacobs, the district court taxed the cost of the Hatch deposition to David; a decision that David argues was error because the deposition was not entered into evidence for a useful purpose. Because our resolution of the other issues results in reversal of the district court's judgment, the taxation of costs against David is concomitantly vacated and we need not give this issue further consideration.
IV. Conclusion.
The district court's ruling which quieted title in the Jacobs is reversed. Because the district court failed to reach the merits of David's counterclaim, we remand this action to the district court for further proceedings consistent with this opinion.