Newrez, LLC v. Sholley

• Court: Court of Appeals of Iowa
• Decided: April 9, 2025
• Docket: 24-0557
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 24-0557 Filed April 9, 2025

NEWREZ, LLC d/b/a SHELLPOINT MORTGAGE SERVICING, Plaintiff-Appellee,

vs.

SHELLY D. SHOLLEY, Defendant-Appellant,

and

LVNV FUNDING, LLC, UNKNOWN SPOUSE OF SHELLY SHOLLEY, LF NOLL, INC., HAMILTON’S FUNERAL HOME, INC., ALL UNKNOWN HEIRS OF DIANNE HANSEN, LINDA LEETE, UNKNOWN SPOUSE OF LEE ANN SIDERS, STATE OF IOWA DEPARTMENT OF REVENUE, PARTIES IN POSSESSION, CALVARY SPV I, LLC, THE ESTATE OF LEE ANN SIDERS, Defendants,

IGNACIO HERNANDEZ, Third-Party-Defendant. ________________________________________________________________

Appeal from the Iowa District Court for Polk County, Samantha Gronewald,

Judge.

A petitioner appeals the district court ruling dismissing her petition to vacate

a judgment. AFFIRMED.

Robb D. Goedicke of Neighborhood Law Group of Iowa, West Des Moines,

for appellant.

Rodney W. Kleitsch, West Des Moines, for appellee.

Considered without oral argument by Tabor, C.J., and Ahlers and Sandy,

JJ. 2

SANDY, Judge.

This appeal provides a refresher course on the Iowa Rules of Civil

Procedure. Newrez LLC, doing business as Shellpoint Mortgage Servicing

(Shellpoint), held a mortgage on a home in Des Moines owned by Shelly Sholley.

After Sholley missed months of payments on the mortgage, Shellpoint successfully

petitioned to foreclose and received an in rem judgment. The property was then

sold via a sheriff’s sale.

Sholley subsequently petitioned to vacate the judgment, arguing she had

not received proper notice of the foreclosure proceedings and had been defrauded

by Shellpoint. Shellpoint moved to dismiss Sholley’s petition because it had never

been served original notice—signed by the clerk and under the seal of the court—

within the timeline provided by the rules of civil procedure. The district court agreed

with Shellpoint and dismissed the petition for Sholley’s failure to properly serve

Shellpoint with original notice in a timely manner.

Because we find the district court properly dismissed Sholley’s petition to

vacate for failure to properly serve Shellpoint with original notice—signed by the

clerk and under the seal of the court—in a timely manner, we affirm.

I. Background Facts and Proceeding Facts

In 2001 Lee Ann Siders (Sholley’s aunt) purchased a home in Des Moines.

To finance the purchase, Siders executed a promissory note that was secured by

a mortgage. The mortgage repeatedly changed hands over the years but was

eventually assigned to Shellpoint. The home has also changed hands several

times throughout the years. Siders passed away in 2012. A probate action was

then initiated, which resulted in the home being conveyed to Dianne Hansen 3

(Sholley’s mother) via a court officer’s deed in 2016. Hansen assumed the

mortgage. In 2019, the home was conveyed via a quit claim deed to Sholley.

Sholley did not assume the mortgage.

Despite not assuming the mortgage, Sholley frequently made payments

toward the underlying debt. However, these payments ceased in March 2021. At

the time Sholley stopped making payments, there remained an unpaid principal

balance of $36,008.55 on the mortgage. After months of missed payments on the

underlying debt, Shellpoint filed a petition to foreclose the mortgage and requested

an in rem judgment in June 2022. Sholley never filed a response to the petition

and did not otherwise participate in the foreclosure proceedings. Because Sholley

failed to participate in the foreclosure proceedings, Shellpoint filed a motion for

default judgment. The district court subsequently issued a ruling finding Sholley

to be in default and granted Shellpoint’s requests for foreclosure and an in rem

judgment.

The property was scheduled to be sold via a sheriff’s sale during the

summer of 2023. However, the proceedings were stayed because Sholley filed

for bankruptcy in federal court. See 11 U.S.C. § 362 (providing that an individual

filing for bankruptcy in federal court operates as automatic stay of judicial

proceedings filed prior to bankruptcy action).1 Sholley’s bankruptcy action was

eventually dismissed, and the district court entered an order lifting the stay and

permitting Shellpoint to proceed with a sheriff’s sale.

1 During a later-held hearing, Sholley explained that she filed for bankruptcy in

federal court on the advice of a Shellpoint employee because she was told it would halt the foreclosure proceedings. Shellpoint denies that one of its employees advised Sholley to file for bankruptcy. 4

The property was sold via a sheriff’s sale to Ignacio Hernandez for $75,000

on October 3, 2024. That same day, Hernandez filed for a writ of removal and

possession, which was granted by the district court. A day later, Sholley filed a

petition to vacate the judgment and stay the execution of the writ of removal and

possession. In her petition, Sholley asserted she was never properly served. She

also alleged Shellpoint “was regularly taking monthly payments” from her,

“including after the entry of judgment.”

The district court held a hearing on Sholley’s petition to vacate on

October 6. Sholley and Shellpoint both participated in this hearing. Shellpoint was

represented by its attorney Andrea Dyer. During the hearing, the district court

heard testimony from Sholley. In her testimony, Sholley explained that she had

been in contact with Shellpoint throughout the foreclosure proceedings. According

to her, Shellpoint consistently indicated it was not going to move forward with

foreclosure. As she testified, “I’ve been making payments, and I was supposed to

be getting them—the modification of the loan and it would be like you have one

point of contact, 2.5 percent interest kind of thing.”

Sholley also admitted she was behind on the mortgage payments and

added:

I was behind a couple [of months] because I was going through a third party. I would send the money and then they would take it and send it to Shellpoint and they would give me a receipt of when Shellpoint actually acknowledged that they received it. So all of a sudden about that time, one of the payments, like, the month, you know, at the end of the month, it comes back to me, and I called them and asked them why I got that money, and they said well, you know, you can see that we got it. We have the cash. We got them the cash. They accepted it, and then two weeks later they turned around and sent the same amount back to us and said to give it back to you. 5

Additionally, Sholley testified that she continued to make payments on the

mortgage up until October 2023—more than seven months after Shellpoint

received the in rem judgment.

Following the hearing, the district court entered an order staying the writ of

removal and possession. The district court noted that Sholley’s allegations, if true,

“could constitute fraud that would result in the judgment being vacated.” As part

of the order, the district court directed Sholley to file an amended petition to vacate

the judgment “specifying the current allegations.” Sholley was ordered to promptly

serve Hernandez with the amended petition. However, in the order, the district

court did not provide a deadline for Sholley to file the amended petition and serve

Hernandez. To address this omission, Shellpoint filed a motion to enlarge,

requesting that the district court provide a deadline for filing of the amended

petition and its service. The district court granted this motion and ordered Sholley

to file the amended petition “not later than 10/21/23 and serve the same on []

Hernandez not later than 10/31/23.”

Sholley filed an amended petition on October 23. However, she was unable

to serve Hernandez with the amended petition and original notice by the district

court’s October 31 deadline. Sholley then filed a motion for service by alternate

means, alleging Hernandez had told her attorney that he would not disclose his

address. This motion was denied by the district court. However, due to

Hernandez’s refusal to provide an address for service, the district court granted

Sholley additional time to effect service on him.

As for service of Shellpoint, two affidavits of service were filed with the

district court indicating service of the amended petition and original notice had 6

been carried out on November 10. The first affidavit asserted the amended petition

and original notice were served on Linna Baccam at Corporation Service

Company—the purported registered agent for Shellpoint. The second affidavit

provided that a copy of the amended petition and original notice were served on

Danielle Landals of Southlaw, P.C.—the law firm representing Shellpoint.

In February 2024, Shellpoint filed a motion to quash service and dismiss

Sholley’s petition to vacate. In its motion, Shellpoint asserted “Linna Baccam is

not, and was not, an employee of Corporation Service Company.” Shellpoint

added that Baccam was an employee of Southlaw, P.C., which wasn’t authorized

to accept service on its behalf. As for the purported service of the amended petition

and original notice on Danielle Landis, Shellpoint claimed “[t]here is no individual

named Danielle Landis employed by Southlaw, P.C.” Additionally, Shellpoint

contended “Sholley failed to provide original notice signed by the clerk and under

of the seal of the clerk.”

The district court held a hearing on Shellpoint’s motion to quash service and

dismiss on March 1.2 During the hearing, Shellpoint argued:

Your honor, my client still has not been served with an original notice in this action. Original notices are distinct from other types of filings in that the Iowa Rules specifically provide for the manner in which they are to be served. In Iowa Rule of Civil Procedure 1.305, it provides for manner of service. No provision is made for service through EDMS. Indeed, the Iowa Rules of Electronic Procedure plainly recognize a distinction between service of original notice and other documents at Rule 16.315, which only provides for electronic service of documents subsequent to original notice.

2 Sholley admitted she did not serve Shellpoint with original notice signed by the

clerk and under the seal of the court within ninety days of the filing of the amended petition during the hearing. 7

Service of original notice is an absolute requirement to proceed with a petition to vacate judgment under Rule 1.1013(2), which states in pertinent part, quote, The petitioner must serve the adverse party with an original notice and petition in the manner provided for in Rules 1.301 through 1.315, end quote. There is no gray area here. This is plain language, [an] absolute requirement to proceed with the petition to vacate. The petitioner must serve the adverse party with an original notice. Not may serve, not should serve, must serve. The bottom line is, if this hasn’t been done, the Court doesn’t have jurisdiction to proceed further with the case.

Following the hearing, the district court issued its ruling dismissing Sholley’s

petition to vacate. In reasoning that dismissal was appropriate, the district court

stated Iowa Rule of Civil Procedure 1.302(2) “provides that the original notice shall

be signed by the clerk and under the seal of the court.” The district court added,

“as it is undisputed that Mrs. Sholley has not served [Shellpoint] with an Original

Notice consistent with Iowa R. Civ. P. 1.302(2), [Shellpoint’s] Motion must be

GRANTED.” Sholley’s petition was dismissed without prejudice.

Sholley now appeals.

II. Standard of Review

“We review a district court’s ruling on a motion to dismiss for the correction

of errors at law.” Nahas v. Polk Cnty., 991 N.W.2d 770, 775 (Iowa 2023) (citation

omitted). “The court may consider matters outside the pleadings where, as here,

certain undisputed facts arose after [the party] filed [their] petition, and the issues

before the court do not concern the adequacy of the petition to state a claim for

relief.” Brubaker v. Est. of Delong, 700 N.W.2d 323, 326 (Iowa 2005).

III. Analysis

On appeal, Sholley argues the district court erred in dismissing her petition

to vacate because the court cited “a criminal case” to support its interpretation of 8

the word “shall,” as used in Iowa Rule of Civil Procedure 1.302(2). In doing so,

Sholley contends the district court “overlooked well-established case law in civil

matters.” Sholley also claims Shellpoint waived any defects in service of original

notice because it “appeared via counsel and participated in a hearing concerning

the allegations set forth in her Petition to vacate.” She also notes Shellpoint filed

a motion following the October 6 hearing. Sholley believes this amounted to a

general appearance and thus waived any defects with service of original notice.

Lastly, Sholley argues the district court’s dismissal of her petition for failure to

properly serve original notice was “draconian” and overlooked “long standing policy

in our state favoring the resolution of legal disputes on the merits.” We disagree

on each point.

“An original notice is the formal writing, issued by authority of law, for the

purpose of bringing defendants into court to answer [a] plaintiff’s demands in a civil

action.” Jacobson v. Leap, 88 N.W.2d 919, 921 (Iowa 1958). In petitioning for

vacating or modifying a judgment, “[t]he petitioner must serve the adverse party

with an original notice and petition in the manner provided in rules 1.301

through 1.315.” Iowa R. Civ. P. 1.1013(2). “The original notice shall be signed by

the clerk and under the seal of the court.” Id. r. 1.302(2). Our rules make the filing

party “responsible for service of an original notice and petition within the time

allowed under rule 1.302(5).” Id. r. 1.303(3). Iowa Rule of Civil

Procedure 1.302(5) provides that:

If the service of the original notice is not made upon the defendant, respondent, or other party to be served within 90 days after filing the petition, the court, upon motion or its own initiative after notice to the party filing the petition, shall dismiss the action without prejudice as to that defendant, respondent, or other party to be served or direct 9

an alternate time or manner or service. If the party filing the papers shows good cause for the failure of service, the court shall extend the time for service for an appropriate period.

The use of the word “shall” in rule 1.302(2) and (5) is fatal to Sholley’s first

argument. We generally interpret the Iowa Rules of Civil Procedure in the same

manner we interpret statutes. See Fisher v. Davis, 601 N.W.2d 54, 60 (Iowa 1999)

(“Rules have the force and effect of statutes. Consequently, we interpret rules in

the same manner we interpret statutes.” (internal citations omitted)). And our

courts have consistently interpreted the word “shall” in statutes to imply a

mandatory duty. See In re Marriage of Thatcher, 864 N.W.2d 533, 539 (Iowa 2015)

(“In a statute, the word ‘shall’ generally connotes a mandatory duty.” (citation

omitted)).

Thus, reading the applicable rules together, we conclude a petition to modify

or vacate a judgment and original notice—signed by the clerk and under the seal

of the court—must be served on an adverse party within ninety days of the filing of

the petition. In other words, if a petitioning party serves original notice on an

adverse party that is not signed by the clerk and under the seal of the court, they

have failed to properly serve original notice under the rules. See Iowa R. Civ.

P. 1.302(2), (5). And failure to serve original notice on an adverse party within the

ninety-day timeline prescribed by rule 1.302(5)—absent a showing of good

cause—is a well-recognized ground for dismissal. See Brubaker, 700 N.W.2d

at 326 (“Rule 1.302(5) requires the court to dismiss an action without prejudice for

the untimely service of original notice.”); see also Wang v. Baumgartner, No.

18-0926, 2019 WL 1055857, at *3 (Iowa Ct. App. Mar. 6, 2019) (affirming the

district court’s dismissal of a petition for failure to properly serve original notice in 10

compliance with rule 1.302(5)). Sholley makes no attempt to establish good cause

for her failure to timely serve Shellpoint with proper original notice.3 Accordingly,

we find the district court did not err by dismissing her petition to vacate the

judgment on this ground.

We also cannot conclude that Shellpoint waived any defects in service of

original notice by participating in the October 6 hearing on Sholley’s petition and

filing a motion after that hearing. In support of her argument on this point, Sholley

cites Lonning v. Lonning, a case in which our supreme court concluded the filing

of an answer by a mother in a child custody modification action waived any claimed

notice defects. 199 N.W.2d 60, 62 (Iowa 1972) (finding a filing of an answer by

the mother’s attorney “was a general appearance obviating the necessity of notice

and subjecting the mother personally to district court jurisdiction”). 4

But more recently, our supreme court has indicated an adverse party may

participate in the underlying litigation—to some extent—without waiving

challenges to service defects. See Antolik v. McMahon, 744 N.W.2d 82, 83–84

(Iowa 2007) (concluding an adverse party is not required to challenge a notice

defect in a pre-answer motion and may “raise the defense in a pre-answer motion,

a responsive pleading, or a motion for summary judgment.”); see also Iowa R. Civ.

3 Sholley filed her amended petition on October 23, 2023. Ninety days from October 23 would have been January 21, 2024—a Sunday. Thus, Sholley had until January 22 to serve Shellpoint with original notice. See Iowa Code § 4.1(34). 4 Sholley argues that Lonning stands for the proposition that the filing of a pleading

waives challenges to insufficient notice or service of process. Thus, because Shellpoint filed a motion to enlarge a district court order issued shortly after the October 6 hearing, she believes Shellpoint waived any challenges to defects in the service of original notice. However, there is one problem with this argument. Motions do not count as pleadings. State v. LePon, No. 18-0777, 2019 WL 2369887, at *14 (Iowa Ct. App. June 5, 2019) (“Motions are not pleadings.”). 11

P. 1.455 (providing that a challenge to insufficiency of service of process may be

“made in a pleading or by motion” and “shall be determined before trial.”). And we

have rejected a similar argument that an adverse party waives challenges to

original notice service defects by simply appearing and participating in the lawsuit.

See Merchant v. Wilson, No. 20-1465, 2022 WL 468753, at *3 (Iowa Ct. App.

Feb. 16, 2022) (rejecting a plaintiff’s argument that the defendant waived

challenges to defects in the service of original notice by appearing at several court

hearings because the defendant was free to object to notice defects “in a later

filing”). Therefore, we find Shellpoint did not waive challenges to defects in service

of original notice by filing a motion to enlarge and participating in several court

hearings related to Sholley’s petition to vacate.

In a last-ditch effort to save her petition, Sholley contends the district court’s

dismissal of her petition due to her failure to serve Shellpoint with original notice

signed by the clerk and under the seal of the court was “draconian.” She argues

the district court’s ruling ignores a well-settled policy of our courts to decide cases

on the merits. Sholley is correct that our courts generally favor deciding cases on

the merits. See Toney v. Parker, 958 N.W.2d 202, 210 (Iowa 2021) (“We recently

reiterated that ‘there is a longstanding policy in our state favoring the resolution of

legal disputes on the merits.’” (citation omitted)).

However, we believe the district court was obligated to follow the clear

directive that a petition to vacate must be dismissed if original notice—signed by

the clerk and under seal of the court—is not served on the adverse party within

ninety days of the petition’s filing. See Iowa R. Civ. P. 1.302(2), (5). We cannot 12

ignore the plain language of the rules of civil procedure. As our supreme court

long ago said:

We cannot, however, ignore a clear statutory requirement to achieve what appears to be the best result in a particular case. Such action almost always makes bad law. . . . “The so-called technicalities of the law are not always what they seem. When they establish an orderly process of procedure, they serve a definite purpose and are more than technical; they have substance, in that they lay down definite rules which are essential in court proceedings so that those involved may know what may and may not be done, and confusion, even chaos, may be avoided. They are necessary; without them litigants would be adrift without rudder or compass.”

Krebs v. Town of Manson, 129 N.W.2d 744, 748 (Iowa 1964) (quoting Esterdahl v.

Wilson, 110 N.W.2d 241, 246 (Iowa 1961)). Further, “[t]he failure to timely serve

original notice cannot be deemed a minor or technical error even where the

defendant has actual notice of the petition.” Dewit v. Madison Cnty. Zoning Bd.,

No. 16-1746, 2017 WL 4049508, at *4 (Iowa Ct. App. Sept. 13, 2017). Accordingly,

we cannot find the district court erred in dismissing the petition on this ground.

For the foregoing reasons, we conclude the district court did not err in

dismissing Sholley’s petition to vacate.

IV. Conclusion

Because we find the district court did not err in dismissing Sholley’s petition

for failure to timely serve original notice—signed by the clerk and under the seal of

the court—we affirm.

AFFIRMED.