Homestead hits the “news”

Citimortgage, Inc., v. Danielson, suddenly hit the press today, almost two years after the fact. The Des Moines Register and Associated Press have been running the story about an Iowa Court of Appeals decision filed in May 2009. This is in conjunction with Senate File 400 approved by the Senate 48-0 on March 14.

In the Danielson case, the trial and appellate courts strictly applied Iowa Code § 561.13 to find the mortgage void because it lacked a spouse’s signature. Thus, the homeowners walked away with an “almost free house.”

This is the opposite result from that reached by the same court in JP Morgan Chase Bank v. Hawkins, decided in February 2011. For more on this, see the previous post Whither the Homestead?

Unlike the Hawkins case, the Danielson case does not discuss the antecedent debt/purchase money mortgage argument. The Danielson court does not mention this issue. Moreover, the Danielson court agreed with the homeowner that there was no evidence of fraud, which has a fairly difficult standard.

Citimortgage probably did not lose anything on the transaction. The attorney general was one of the attorneys appearing on behalf of Citimortgage, the appellant. This suggests that Iowa Title Guaranty insured title and probably was subrogated to Citimortgage’s claim. I would guess that Citimortgage received a big check to make it whole. Title Guaranty (or whoever the title insurer may have been) potentially has a cause of action against the folks that set up and closed this loan.

Rules

I was interested to read Justice Baker’s decision for a unanimous Iowa Supreme Court in Lawson v Kurtzhals, No. 08–1766 (Iowa 12/3/2010). Civil procedure and evidence cases do not usually hold my attention very long, but this one seemed like a victory for the rule-followers against the rule-breakers. I probably spend too much time trying too hard to make sure that I follow the rules of procedure. Frankly, I get concerned about blowing some deadline and then being liable to the client for not having done my job properly. I probably wouldn’t otherwise blog about such a case, but it struck me because it always seems like the other side gets away with the looseness of notice pleading, blown deadlines, and general rule-breaking.

In Lawson, Justice Baker appears to me to have made a stern statement to the scofflaws of the profession. The defendant in that case requested a statement of damages from the plaintiff. The plaintiff failed to answer a couple of times, once in interrogatories and once in depositions. The defendant filed a motion in limine to prevent evidence on damages that had not been disclosed. Trial began. The trial court after two (?!) arguments on the motion, finally granted the motion. After three days of trial, the plaintiff responded by a motion to dismiss, which was granted, and re-filing a substantially identical action. In other words, the plaintiff basically attempted and the trial court effectively allowed the plaintiff to hide the evidence, drag the defendant through three days of trial, and then start all over. Justice Baker said “no,” the plaintiff did not get a second bite at the apple.

The Supreme Court reversed the dismissal order and sent the case back to be retried with the previous exclusionary order. The rules of procedure and the rules of evidence do, in fact, mean something. Litigants do, in fact, have to disclose their evidence and supplement it in a timely way before trial. The trial court obviously has a tough job balancing fairness, due process, and enforcing the rules. There is sometimes tremendous inertia because of the cost and difficulty of getting and enforcing sanctions in litigation. Here, the Supreme Court seems like they put down a marker that needed to be set.