BENSKIN, INC., Appellant, vs. WEST BANK, Appellee.
No. 18–1966
IN THE SUPREME COURT OF IOWA
Submitted November 18, 2020—Filed December 23, 2020
Waterman, J.
Appeal from the Iowa District Court for Polk County, Samantha J. Gronewald, Judge.
Defendant Bank seeks further review of court of appeals decision reversing order granting motion to dismiss. DECISION OF COURT OF APPEALS AFFIRMED IN PART AND VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED.
Waterman, J., delivered the opinion of the court, in which all participating justices joined. McDermott, J., took no part in the consideration or decision of the case.
Steven P. DeVolder (argued) of DeVolder Law Firm, P.L.L.C., Norwalk, and William W. Graham of Duncan Green, P.C., Des Moines, for appellant.
Motions to dismiss are disfavored. Iowa is a notice pleading state. Lawyers should exercise “professional patience” and challеnge vulnerable cases by summary judgment or at trial instead of through “premature attacks on litigation by motions to dismiss.” Cutler v. Klass, Whicher & Mishne, 473 N.W.2d 178, 181 (Iowa 1991). The court of appeals took such admonitions to heart and reversed the district court‘s ruling granting a bank‘s motion to dismiss its debtor‘s pleadings, alleging breach of contract, breach of the implied duties of good faith and fair dealing, fraud, and slander of title. The district court, examining the four corners of the debtor‘s amended petition, had ruled that the contract and fraud claims were time-barred, rejected the debtor‘s discovery rule and equitable estoppel arguments, and ruled the slander-of-title count failed to allege the element of publication to a third party. The court of appeals applied equitable estoppel to avoid the time-bar and held the slander-of-title count was adequately pled. We granted the bank‘s application for further review.
On our review, we determine that the district court correctly dismissed this case on the pleadings, except for slander of title. We accept as true the debtor‘s factual allegations. The bank‘s alleged wrongdoing—failure to release encumbrances—took place in 2008, and the debtor admittedly learned of the bank‘s refusal by June 27, 2011, well within the statute of limitations period. The contract and good-faith claims are subject to a seven-year statute of limitations with no discovery rule and that period expired in 2015. The fraud claim is governed by a five-year statute of limitations with a discovery rule and that period expired in 2016. The debtor did not file this lawsuit until May 18, 2018. Those claims are time-barred and the equitable estoppel argument fails as a matter of law. We agree with the court of appeals that slander of title was adequately
I. Background Facts and Proceedings.
According to the amended petition, on October 6, 2006, Benskin, Inc. entered into a written loan agreement with West Bank to borrow $800,094. The loan was secured by guarantees from Martin and Susan Benskin and a real estate mortgage on the corporation‘s property in Dickinson County. The terms of the loan were set forth in a promissory note (the 2006 promissory note), loan guarantees, and a real estate mortgage. The 2006 loan was renewed in a promissory note dated August 1, 2007, with a maturity date of August 1, 2008.
On October 24, 2007, Benskin entered into a separate agreement for a line of credit (the 2007 line of credit) with West Bank for up to $2 million to purchase land for development. The terms were set forth in a promissory nоte again secured by guarantees from Martin and Susan Benskin and mortgages on the Dickinson County land and this time on real estate Benskin owned in Polk County (the 2007 mortgages). Benskin never borrowed against the line of credit. On May 30, 2008, the 2007 promissory note and mortgages matured. “On and after that date, West Bank was obligated to release the 2007 Mortgages.” Benskin alleged,
10. At various times after May 30, 2008, West Bank, through its officers and employees, made multiple representations, now known to have been false, that it would take the steps necessary to release the 2007 Mortgages.
11. Despite its obligation to release the 2007 Mortgages, and contrary to its representations and promises to do so, West Bank failed and rеfused to release the 2007
Mortgages, even after repeated requests and demands from Plaintiff. 12. Defendant‘s first express statement to Plaintiff refusing to release the 2007 Mortgages was on June 27, 2011. At least until that date, West Bank intentionally misled Plaintiff by making . . . false statements and promises leading Plaintiff to believe that West Bank was going to release the 2007 Mortgages and was taking procedural steps to do so.
On July 22, 2016, during the course of other litigation, Benskin further alleged it
learned information indicating that at some time after the creation of the 2007 Line of Credit, West Bank internally altered its records so as to purport to show an unauthorized advance under the 2007 Line of Credit to pay off, before it was due, the 2006 Promissory Nоte. That action was wrongfully concealed by West Bank and was taken by West Bank without Plaintiff‘s agreement, consent, or knowledge and was not discovered by Plaintiff until after July 22, 2016.
The alleged misuse of the line of credit occurred in 2008. Benskin‘s property remained encumbered by the 2007 mortgages.
On May 18, 2018, Benskin sued West Bank in a three-count petition alleging breach of (I) the 2007 contracts, (II) the 2006 promissory note, and (III) the implied duties of good faith and fair dealing. West Bank filed a motion to dismiss on grounds that the seven-year statute of limitations in
The district court granted West Bank‘s motion to dismiss all claims. The court ruled that equitable estoppel can apply to breach of contract claims but determined that Benskin failed to allege a “specific statement or aсtion as the basis of its equitable estoppel claim” and rejected its discovery rule argument. The court determined the first four counts were time-barred and that count V failed to state a claim for slander of title because no publication was alleged.
Benskin appealed, and we transferred the case to the court of appeals. The court of appeals reversed and reinstated all claims, holding that equitable estoppel was adequately pled to avoid a motion to dismiss on the statute of limitations and that the slander-of-title claim was adequately pled. We granted West Bank‘s application for further review.
II. Standard of Review.
“We review a district court‘s ruling on a motion to dismiss for the correction of errors at law.” Shumate v. Drake Univ., 846 N.W.2d 503, 507 (Iowa 2014) (quoting Mueller v. Wellmark, Inc., 818 N.W.2d 244, 253 (Iowa 2012)). “For purposes of reviewing a ruling on a motion to dismiss, we accept as true the petition‘s well-pleaded factual allegations, but not its legal conclusions.” Id. “[W]e will affirm a dismissal only if the petition shows no right of recovery under any state of facts.” Rieff v. Evans, 630 N.W.2d 278, 284 (Iowa 2001) (en banc) (quoting Barnes v. State, 611 N.W.2d 290, 292 (Iowa 2000) (en banc)). We construe the petition in “its most favorable light, resolving all doubts and ambiguities in [the plaintiff‘s] favor.” Id. (quoting Schreiner v. Scoville, 410 N.W.2d 679, 680 (Iowa 1987)).
“A defendant may raise the statute of limitations by a motion to dismiss if it is obvious from the uncontroverted facts contained in the
III. Analysis.
We will first address the applicable statute of limitations and conclude the contract claims are governed by the seven-year limitation in
A. The Governing Statutes of Limitation.
1. Counts I and II, alleging breach of written contracts. The district court ruled that
2. All causes of action, other than actions for relief on the grounds of fraud or mistake, against a state bank based upon a claim or claims founded on a written contract, or a claim or claims inconsistent with an entry or entries in a state bank record, made in the regular course of business, shall be deemed to have accrued, and shall accrue for the purpose of the statute of limitations one year after the breach or failure of performance of a written contract, or one year after the date of such entry or entries. No action founded upon such a cause may be brought after the expiration of six years from the date of such accrual.
2011 Iowa Acts ch. 87, § 2 (codified at
First, Benskin commenced this action in 2018, after the effective date of the 2011 amendment. We apply the period of limitation that is in
Second, we see no reason why these contracts (the commercial line of credit, promissory notes, real estate mortgages, and personal guarantees) at issue were not “made in the regular course of business” within the meaning of
Finally, we hold that
Benskin‘s written contract claims accrued no later than 2008, when West Bank failed to perform the written contract by not releasing the 2007 mortgages. Benskin did not file this action until 2018, over seven years later. The district court correctly ruled that counts I and II are time barred.
2. Count III, alleging breach of duties of good faith and fair dealing. The district court ruled that count III is also govеrned by the seven-year period of limitation in
Even though Benskin‘s count III is based on implied duties of good faith and fair dealing and alleges no written contract term expressly requiring good faith, we conclude it is still subject to
Benskin‘s claims under сount III accrued in 2008 when West Bank failed to perform the written contract by not releasing the 2007 mortgages. Benskin filed this lawsuit in 2018. The district court correctly ruled that count III is time-barred.
3. Count IV, alleging fraud. The parties agree, and the district court ruled, that Benskin‘s fraud claim in count IV is governed by the five-year statute of limitations in
4. Unwritten contracts — injuries to property — fraud — other actions. Those founded on unwritten contracts, those brought for injuries to property, or for relief on the ground of fraud in cases heretofore solely cognizable in a court of chancery, and all other actions not otherwise provided for in this respect, within five years, except as provided by subsections 8 and 10.
Count IV‘s fraud claim accrued, аt the latest, by June 27, 2011, when West Bank reneged on its prior promises and contractual obligation to
B. Benskin‘s Equitable Estoppel and Discovery Rule Arguments. The district court rejected Benskin‘s equitable estoppel and discovery rule arguments. The court of appeals, without reaching the discovery rule, reversed and reinstated counts I–IV based on its conclusion that Benskin adequately alleged equitable estoppel. In our view, Benskin‘s own allegations, as a matter of law, defeat application of the discovery rule and equitable estoppel. Seе Mormann, 913 N.W.2d at 575 (noting “a plaintiff may plead himself out of court by alleging facts that provide . . . a bulletproof defense and foreclose application of equitable tolling“).3
In Mormann v. Iowa Workforce Development, we recently reviewed “the contours of equitable tolling” that “generally involve[] two doctrines, the discovery rule and equitable estoppel.” Id. at 570. Importantly, “[i]n order to invoke either theory of equitable tolling, the asserting party must show reasonable diligence in enforcing the claim.” Id. “The party pleading an exception to the normal limitations period has the burden to plead and prove the exceptions.” Franzen v. Deere & Co., 334 N.W.2d 730, 732 (Iowa 1983); see also Skadburg v. Gately, 911 N.W.2d 786, 793 (Iowa 2018) (“Although [defendant] has the burden of establishing the statute-of limitations defense, [plaintiff], as the party attempting to avoid the limitations period, has the burden of demonstrating any exception.“). We will address the discovery rule and equitable estoppel separately.
2. All causes of action, othеr than actions for relief on the grounds of fraud or mistake, against a state bank based upon a claim or claims founded on a written contract, or a claim or claims inconsistent with an entry or entries in a state bank record, made in the regular course of business, shall be deemed to have accrued, and shall accrue for the purpose of the statute of limitations one year after the breach or failure of performance of a written contract, or one year after the date of such entry or entries. No action founded upon such a cause may be brought after the expiration of six years from the date of such accrual.
1. a. A state bank is not required to preserve its records for a period longer than seven years after the first day of January of the year following the time of the making or filing of such records, provided, however, that account records showing unpaid balances due to depositors shall not be destroyed.
It would make little sense to allow lawsuits to be asserted over seven years after a breach, when the bank may no longer have the relevant records.
The discovery rule, however, can apply in a fraud action governed by
[l]ater discovery of facts may make the claim stronger, but even under a relatively robust approach to the discovery rule,
the knowledge of facts sufficient to make a prima facie case . . . is sufficient to trigger the running of the filing limitations.
913 N.W.2d at 576–77 (footnote omitted); see also Hallett Constr. Co., 713 N.W.2d at 231 (“A claimant can be on inquiry notice without knowing ‘the details of the evidence by which to prove the cause of action.‘” (quoting Vachon v. State, 514 N.W.2d 442, 446 (Iowa 1994))). Under the discovery rule, the statute of limitations on Benskin‘s fraud claim began running no later than June 27, 2011, and its lawsuit filed over six years later is time barred under
2. Equitable estoppel. We agree with Benskin that equitable estoppel can be asserted to avoid the statute of limitations defense in
Benskin argues it had seven years from June 27, 2011 to file suit, such that this action commenced on May 18, 2018, was timely filed. While some jurisdictions give claimants the full statutory period going forward, others merely give a “reasonable time.”4 51 Am. Jur. 2d Limitation of
Actions § 386, at 693–94 (2000) [hereinafter 51 Am. Jur. 2d]. Iowa falls into the latter category.
In Christy v. Miulli, we set an outer limit by stating that when a plаintiff becomes aware, or should have become aware, of the fraud, “the plaintiff must file suit ‘within a period of time not exceeding the original statutory period applicable to the particular cause of action.‘” 692 N.W.2d at 702 (quoting 51 Am. Jur. 2d § 386, at 694). But in Beeck v. Aquaslide ‘N’ Dive Corp., 350 N.W.2d 149, 159 (Iowa 1984), we noted the plaintiff must file suit “within the period of the statute of limitations or, if [defendant] was estopped to assert the statute of limitations, within a reasonable time after the estoppel ceased to be operational.” (emphasis added).
We hold that under
This requirement to file suit within a reasonable time after the estoppel ends
implicitly contains the notion that the estoppel by inducement doctrine does not permit the indefinite and unlimited extension of the limitations period, and also allows a defendant to limit the period during which estoppel might otherwise apply, by taking affirmative steps to terminate whatever behavior or conduct arguably operates to induce a plaintiff not to sue.
51 Am. Jur. 2d § 386, at 694. West Bank ended any estoppel by its unequivocal affirmative communication to Benskin in June of 2011 refusing to remove the encumbrances.
“What constitutes a reasonable time appears to depend upon the exigenсies of the particular case.” Peterson v. Groves, 44 P.3d 894, 898 (Wash. Ct. App. 2002) (quoting Allan E. Korpela, Annotation, Promises to Settle or Perform as Estopping Reliance on Statute of Limitations, 44 A.L.R.3d 482, § 5 (1972)). A period of time may be unreasonable if the plaintiff did not show “reasonable diligence in bringing suit after the conduct giving rise to the estoppel had terminated.” Id. In Butler v. Mayer, Brown & Platt, the appellate court noted: “We have held that as little as six months remaining in a statute of limitations period is ‘ample time’ for a plaintiff to bring suit.” 704 N.E.2d at 745.
Here, Benskin waited an unreasonable time to file its claims as a matter of law. The alleged breach occurred in 2008, giving Benskin no more than seven years—until 2015—to commence this action. See
Benskin argues that it reasonably delayed filing suit because it believed it owed nothing on the recorded encumbrances. Benskin‘s “zero balance” theory fails for several reasons. First, even with a zero balance, the encumbrance on the Polk County real estate, tied to a multi-million dollar credit line, would have restricted Benskin‘s ability to use the property to borrow from another lender. Indeed, its amended petition alleged that as a result of West Bank‘s encumbrances, Benskin “sustained special damages arising, among other things, from its inability to pursue investment and financial opportunities available to it which required unencumbered use of the Des Moines Properties.” Second, West Bank‘s express refusal to release the 2007 mortgages in 2011 put Benskin on inquiry notice. It should have investigated the source of the payoffs on the
The district court correctly rejected Benskin‘s equitable estoppel argument. This legal issue was appropriately resolved by granting West Bank‘s motion to dismiss. See Venckus, 930 N.W.2d at 809. Benskin effectively pled itself out of court. Mormann, 913 N.W.2d at 575 (“[A] plaintiff may plead himself out of court by alleging facts that provide . . . a bulletproof defense and foreclose application of equitable tolling.“).
C. Slander of Title. The district court ruled that count V failed to state a claim because Benskin did not adequately allege the element of publication. See generally Belcher v. Little, 315 N.W.2d 734, 737 (Iowa 1982) (discussing publication element). Benskin cites two unpublished opinions to support its argument that the publication element is satisfied by filing the encumbrance on a public docket: Monroe v. Bank of America Corp., No. 17–cv–248–JED–JFJ, 2018 WL 1875294, at *2 (N.D. Okla. Apr. 19, 2018), and Nelson v. Bayview Loan Servicing, L.L.C., No. 5–12–0419, 2014 WL 4629382, at *15 (Ill. App. Ct. Sept. 16, 2014). We left that question open in Witmer v. Valley National Bank of Des Moines, 223 Iowa 671, 674, 273 N.W. 370, 371 (1937) (“Whether or not the commencement of a foreclosure . . . is an uttering and publishing of slanderous words against appellant‘s title to land, we do not find it necessary to pass upon and do not do so.“).
Recorded documents by definition are available to the general public. A “record” under Iowa law is defined as “a process . . . to incorporate a document or instrument into the public record.”
Other courts have held that recording satisfies the publication element for the tort of slander of title. See, e.g., Fischer v. Bar Harbor Banking & Tr. Co., 673 F. Supp. 622, 626 n.6 (D. Me. 1987) (“The filing of liens, mortgages, and other encumbrances is a sufficient publication to disparage or slander title.” (citing William L. Prosser, The Law of Torts § 122, at 943 (3d ed. 1964))), aff‘d, 857 F.2d 4 (1st Cir. 1988); Shenefield v. Axtell, 545 P.2d 876, 877, 878 (Or. 1976) (en banc) (holding “the complaint sufficiently stated a cause of action for slander of title” where the defendant had “maintained on the [county records] a claim of title to the land held in trust for plaintiff“); see also Phillips, 234 F. Supp. 3d at 1208–09 (holding that “the recording of each of the three documents in the Official Records satisfies the publication requirement in this case“); Fountain Pointe, LLC v. Calpitano, 76 A.3d 636, 640, 643 (Conn. App. Ct. 2013) (affirming judgment of slander of title when the defendants “recklessly record[ed] the mortgages and the lis pendens that they knew were false“); Gasper v. Bank of Am., N.A., 133 N.E.3d 1037, 1046 (Ohio Ct. App. 2019) (“The wrongful filing for the record of a document which casts a cloud upon another‘s title to or interest in realty is considered to be an act of publication which gives rise to an action for slander of title.” (quoting
We find these authorities persuasive and now answer the question we left open in Witmer. We hold that filing an encumbrance on a public docket in the recorder‘s office satisfies the publication element for slander of title.
West Bank argues that Benskin failed to specifically allege the encumbrance was filed pursuant to the recording stаtute. This argument fails under our liberal standards for notice pleading. The allegations of count V gave fair notice of the nature of the claim. By definition, to constitute a slander of title, the complained-of encumbrance would have been publicly filed. We construe Benskin‘s amended petition in “its most favorable light, resolving all doubts and ambiguities in [the plaintiff‘s] favor.” Rieff, 630 N.W.2d at 284 (quoting Schreiner, 410 N.W.2d at 680). We reverse the district court‘s ruling dismissing count V and affirm the court of appeals decision that count V states a claim for slander of title.
West Bank raised the statute of limitations in district court and on appeal as an alternative ground for dismissing the slander-of-title claim. Neither the district court nor the court of appeals reaсhed that ground, and West Bank did not raise it in its application for further review. Although the issue was minimally raised, it wasn‘t briefed, and we decline
IV. Disposition.
For these reasons, we affirm the decision of the court of appeals reinstating the slander-of-title claim and vacate the court of appeals decision on equitable estoppel. We affirm the district court judgment dismissing counts I through IV and reverse the judgment dismissing count V. We remand the case for further proceedings on the slander-of-title claim.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED.
All justices concur except McDermott, J., whо takes no part.