Opinion
No. 5-072 / 04-0525
Filed May 11, 2005
Appeal from the Iowa District Court for Sac County, Gary L. McMinimee, Judge.
Defendants appeal from a district court summary judgment ruling that dismissed the four counterclaims they filed against plaintiff. REVERSED AND REMANDED.
Thaddeus Cosgrove of Cosgrove Law Firm, Holstein, and Joseph Heidenreich of Dresselhuis Heindenreich, Odebolt, for appellant.
Dave Jennett, Storm Lake, for appellee.
Heard by Sackett, C.J., and Zimmer and Hecht, JJ.
Defendants Francis, Irene, Michael, and Thomas Meister appeal from the district court summary judgment ruling that dismissed the four counterclaims they filed against plaintiff Hallett Construction Company (Hallett). Because we conclude the claims were not barred under the applicable statutes of limitation, we reverse the district court's summary judgment ruling and remand this matter for further proceedings.
I. Background Facts and Proceedings.
The summary judgment record reveals the following undisputed facts. Francis and Irene Meister, and their sons Michael and Thomas Meister, own ninety acres of real property in Sac County, Iowa. On July 7, 1987, the Meisters met with representatives of Hallett. The Hallett representatives presented the Meisters with a proposed lease that granted Hallett the right to remove sand and gravel from the Meisters' property. In exchange, Hallett was to pay the Meisters certain rents and royalties. The lease was for a period of ten years and twelve months and, in paragraph 11, granted Hallett the option to renew the lease "for an additional period of 10 years from the date of its termination."
The Meisters objected to the renewal provision. The Hallett representatives struck the "10" from paragraph 11, and inserted a "0." The Meisters then signed the lease (Lease 1), and their signatures were notarized by a Hallett representative. A copy of Lease 1 was retained by the Hallett representatives, so that it could be signed by the appropriate company officers. A second copy was given to the Meisters. Irene Meister, the family member who kept the written documents pertaining to the family business, placed the family's copy of Lease 1 in a file at her home.
Approximately one month later a Hallett representative presented the Meisters with a copy of the lease signed by both the Meisters and the appropriate company officers. Both the representative and the Meisters initialed each page of the lease, with the exception of the signature page. One of the initialed pages contained paragraph 11. In this copy of the lease, paragraph 11 once again provided Hallett the option to renew the lease "for an additional period of 10 years from the date of its termination."
There is no affirmative showing the representative informed the Meisters that the ten-year option had been placed back into the lease. The Meisters did not read the pages they initialed, but assumed they were initialing the lease pages as they existed on July 7. The Meisters were also provided with a copy of this lease (Lease 2), which Irene Meister placed in a separate file at her home.
According to Michael Meister the Hallett representative had them initial the lease pages, then left; "[he] did not go through it with us again, and we did not look it over. . . ." According to Irene Meister, she "never really understood" why she had to initial the lease: "I was just told that something — I don't know whether there was — a change had been made or what, and we were supposed to sign — initial it. . . ."
"[I]n the summer — or maybe April or January" of 1996 Michael Meister contacted an attorney to arrange for termination of the lease with Hallett. He provided the attorney with a copy of Lease 2. In reviewing Lease 2 with Michael, the attorney pointed out the lease contained a ten-year option to renew. Although the Meisters believed they had rejected the renewal option they concluded, in light of the provisions in Lease 2, that they were mistaken in their recollection. In May 1998, consistent with Lease 2, Hallett gave the Meisters notice of its intent to renew the lease for an additional ten years.
Sometime in 2001, at the suggestion of their attorney, Michael and Irene reviewed the files related to the agreement with Hallett. In reviewing the files they "found" the copy of Lease 1.
In March 2003 Hallett filed a four count petition naming the Meisters as defendants. The petition alleged the Meisters had interfered with Hallett's use of the leasehold commencing in September 2001; had published a defamatory letter to Hallett's customers; and in December 2002 had given Hallett notice they were terminating the lease for failure to cure defaults, and because the lease had expired pursuant to paragraph 11 as contained within Lease 1. Hallett asked the court to declare that the lease remained in full force and effect, and sought damages for alleged interference with a contractual relationship, defamation, and breach of leasehold covenants.
In their answer the Meisters pled as an affirmative defense that the written lease was invalid because Hallett had materially altered the lease after it was executed by the Meisters, and did so without the Meisters' knowledge. The Meisters also filed four counterclaims. The first three alleged that there was no valid agreement between the parties and that Hallett was an at-will tenant. Count I sought to recover possession of the Meisters' real property from Hallett, Count II sought damages for Hallett's alleged holding over beyond the at-will lease term, and Count III sought damages for Hallett's alleged breach of the at-will agreement, asserting Hallett failed to pay agreed rentals and royalties. Count IV sought compensatory and punitive damage for Hallett's alleged fraudulent misrepresentation in materially altering the lease without the Meisters' knowledge or consent.
Hallett moved for summary judgment, seeking dismissal of the Meisters' counterclaims. Hallett asserted, in relevant part, that the counterclaims were barred by the applicable statutes of limitation, as the Meisters were on actual or constructive notice of any alleged fraud for a period of time in excess of the limitation periods. In their resistance, the Meisters asserted there was a disputed issue of material fact as to when the limitation periods began to run, because there was a disputed fact issue as to when the Meisters discovered or should have discovered the alleged fraud.
The district court granted Hallett's motion, and dismissed all four counterclaims. The court concluded the Meisters' claims accrued no later than 1996, when Michael met with the attorney and learned that the option to renew was part of the lease agreement, and thus were time barred under the applicable statutes of limitation. The Meisters appeal.
II. Scope and Standards of Review.
Summary judgment rulings are reviewed for correction of errors at law. Iowa R. App. P. 6.4; General Car Truck Leasing Sys., Inc. v. Lane Waterman, 557 N.W.2d 274, 276 (Iowa 1996). Where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. Iowa R. Civ. P. 1.981(3); City of West Branch v. Miller, 546 N.W.2d 598, 600 (Iowa 1996). We view the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, in the light most favorable to the nonmoving party. Bearshield v. John Morrell Co., 570 N.W.2d 915, 917 (Iowa 1997); City of West Branch, 546 N.W.2d at 600.
III. Discussion.
In granting Hallett summary judgment, the district court concluded the Meisters' fourth counterclaim, Count IV, Fraud and Deceit, was barred under the statute of limitation contained in Iowa Code section 614.1(4), which provides actions "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," must be brought within five years after they accrued. The court appeared to reason that any fraud occurred in 1987 during the lease execution, and was discoverable by the Meisters and thus accrued no later than the 1996 meeting between Michael and the attorney. As this occurred more than five years prior to the filing of the counterclaim, the court determined the counterclaim was barred.
The court also dismissed Counts I, II, and III. The court did not specify a reason for dismissing these counts, beyond its conclusion that the Meisters could not sustain a claim for fraud. Presumably the court reasoned that, if a claim for fraud was barred, then the Meisters would be unable to prove the invalidity of the written agreement with Hallett, a necessary element of the remaining counts.
We start, as did the district court, with Count IV. The Meisters assert the district court erred in concluding this claim was subject to the five-year statute of limitation in section 614.1(4). They contend that because the counterclaim revolves around the validity of the written lease agreement it is "founded on [a] written contract ," and thus subject to a ten-year statute of limitation. See Iowa Code § 614.1(5). We agree with the district court's conclusion.
In determining which statute of limitation applies to a particular claim, this court must look to the claim's actual nature. See Bob McKiness Excavating Grading, Inc. v. Morton Bldgs., Inc., 507 N.W.2d 405, 411 (Iowa 1993). The applicable statute of limitation depends upon the nature of the right sued upon, and not on the elements of relief sought for the claim. Sandbulte v. Farm Bureau Mut. Ins. Co., 343 N.W.2d 457, 462 (Iowa 1984). Accordingly, "[a] cause of action is not upon a `contract founded upon an instrument in writing' merely because it is in some way remotely or indirectly connected with the instrument or because the instrument would be a link in the chain of evidence establishing the cause of action." Matherly v. Hanson, 359 N.W.2d 450, 455 (Iowa 1984) (quoting with approval Kersten v. Continental Bank, 628 P.2d 592 (Ariz.Ct.App. 1981) (internal citations omitted)).
Count IV asserts a cause of action at law for fraud, and seeks money damages based upon the allegedly fraudulent action. See Sedgwick v. Bowers, 681 N.W.2d 607, 610-11 (Iowa 2004) (listing elements of fraud). It does not allege an action against Hallett founded upon a written contract. See Matherly, 359 N.W.2d at 455; see also Rieff v. Evans, 630 N.W.2d 278, 289-90 (Iowa 2001). Accordingly, the district court correctly determined that the five-year statute of limitation contained in section 614.1(4) is applicable to this claim. However, we conclude the court erred when it further determined the claim was barred because it had accrued no later than 1996.
While the parties focus upon whether the discovery rule or some other tolling mechanism applies in this matter, such arguments are based upon a presumption that, absent the application of the discovery rule or a similar doctrine, the Meisters' cause of action accrued in 1987. However, in reviewing the record, it soon becomes apparent that this cause of action did not accrue until 1998, when Hallett exercised the option to renew.
As a general matter, an action for fraud accrues, and the statute of limitation begins to run, when the fraud is consummated. Woods v. Schmitt, 439 N.W.2d 855, 861 (Iowa 1989). Hallett asserts the fraud was consummated in 1987, when the renewal option was reinserted into the written agreement. However, "[f]undamental to our tort law is that a cause of action accrues only when all the necessary elements have occurred." Slater v. Farmland Mut. Ins. Co., 334 N.W.2d 728, 730 (Iowa 1983). Accordingly,
"[t]here must be actual loss to the interest of another before a cause of action accrues. Generally, the wrong or negligence of the party charged gives in itself no right of action to anyone." In other words, a cause of action does not arise until the injury occurs.
Id. (citations omitted).
Under the summary judgment record, and in support of this claim for money damages, the only injury complained of is that which occurred when Hallett exercised the option to renew. This indisputably did not occur until May 1998, less than five years prior the April 2003 filing of the counterclaims. Accordingly, the fraud counterclaim was timely filed, and the district court erred in dismissing it. Looking to the remaining three claims, we similarly conclude that, under the summary judgment record, none are barred by their applicable statute of limitation.
Count I states a claim for the "recovery of possession of the real property." Such a claim is authorized by Iowa Code section 646.2, which provides that "[a]ny person having a valid subsisting interest in real property, and a right to the immediate possession thereof, may recover the same by action against any person acting as owner, landlord, or tenant of the property claimed." An action to recover the possession of real property is subject to a ten-year statue of limitation. See Iowa Code § 614.1(5). Accordingly, Count I is time-barred only if the cause of action therein accrued prior to April 1993.
We recognize that the validity of the written lease agreement underlies this claim. We further recognize that an independent claim to void the agreement based upon fraud would have accrued in 1987, and thus would have been barred unless the statute of limitation was tolled until April 1998 or later, or Hallett was estopped from asserting a statute of limitation defense. See Christy v. Miulli, 692 N.W.2d 694, 700-01 (Iowa 2005) (clarifying that doctrine of fraudulent concealment estopps a party from asserting a statute of limitation defense); Rieff, 630 N.W.2d at 291(defining common law discovery rule). However, we need not address whether such a claim would be barred. First, we note that fraud is not the only basis upon which to invalidate the written lease, as the Meisters' answer sufficiently asserts that the lease was void or voidable due to mistake or alteration. See Nichols v. City of Evansdale, 687 N.W.2d 562, 571 (Iowa 2004) (defining mistake in formation); Harris v. Manning Independent Sch. Dist., 245 Iowa 1295, 1299, 66 N.W.2d 438, 441 (1954) (defining alteration). Moreover, in determining which statute of limitation applies to a claim, we focus on the nature of the claim, rather than on the underlying elements. See Tilton v. Bader, 181 Iowa 473, 478-79, 164 N.W. 871, 873 (1917) ("The mere fact that a litigant alleges and must prove fraud in order to establish his title does not render the action other than one for the recovery of real property. The . . . allegation and evidence of fraud is merely incidental to the relief granted.").
Hallett, as the party seeking summary judgment, bore the burden of showing there were no material facts in dispute, and that it was entitled to judgment as a matter of law. See Iowa R. Civ. P. 1.981(3), (5); Weinzetl v. Ruan Single Source Transp. Co., 587 N.W.2d 809, 810 (Iowa Ct.App. 1998). Under the particular circumstances here, where Hallett asserts the claim is barred by the statute of limitation, the record must indisputably show that the claim accrued beyond the limitation period. Unfortunately for Hallett, there is no such showing.
Hallett contends that it is incumbent upon the Meisters to respond with an affirmative showing of disputed fact on any material issue. However, an adverse party's failure to set out disputed material facts is fatal only if summary judgment is otherwise appropriate. See Iowa R. Civ. P. 1.981(5).
Count I asserts Hallett was allowed to remain on the Meisters' land under an at-will tenancy, and refused to relinquish the property upon demand from the Meisters. The only demand in the record occurred in 2002, less than a year before the counterclaim was filed. Even if the running of this claim was to be measured by the Meisters' alleged interference with Hallett's use of the property, under the record this occurred no sooner than 2001. Moreover, there is no evidence that Hallett's occupancy of the land, prior to April 1993, was other than with the consent of the Meisters. Accordingly, we conclude the court erred in dismissing Count I as barred by the statute of limitation.
We reach the same conclusion regarding Counts II and III, which are both subject to the five-year statute of limitation in section 614.1(4), whether as actions "founded on [an] unwritten contract," or "not otherwise provided for. . . ." These counts were properly dismissed only if the undisputed facts demonstrated that the underlying claims accrued prior to April 1998. Again, there is no such showing in the record.
The injury alleged in Count II is Hallett's wrongful holding over following the termination of the at-will tenancy. As with Count I, there is no evidence that Hallett's occupancy of the land prior to April 1998 was other than with the permission of the Meisters. Count III alleges a failure to pay rents and royalties by Hallett. Hallett makes no effort to direct this court to the undisputed evidence that shows these alleged breaches occurred prior to April 1998. In fact, the record appears to be entirely silent on this issue. Because the summary judgment record did not show as a matter of undisputed fact that that these causes of action accrued prior to the statutory period, it was error to grant summary judgment to Hallett and dismiss the claims.
IV. Conclusion.
Unless it appeared as a matter of undisputed fact that the causes of action accrued beyond the applicable limitation period, summary judgment should not have been granted. Because there is no such showing in the record as to any of the Meisters' counterclaims, the district court erred in granting Hallett summary judgment and dismissing the claims. Accordingly, we reverse the court's summary judgment ruling. This matter is remanded for further proceedings not inconsistent with this opinion.
REVERSED AND REMANDED.
Hecht, J., concurs; Sackett, C.J., dissents in part.
I concur in part and dissent part. I would affirm.