Nicole Adams v. Long Branch Maintenance Corp.

• Court: Court of Appeals of Iowa
• Decided: August 19, 2020
• Docket: 19-0335
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 19-0335 Filed August 19, 2020

NICOLE ADAMS, Plaintiff-Appellant/Cross-Appellee,

vs.

LONG BRANCH MAINTENANCE CORP., Defendant-Appellee/Cross-Appellant. ________________________________________________________________

Appeal from the Iowa District Court for Guthrie County, Randy V. Hefner,

Judge.

Nicole Adams appeals and Long Branch Maintenance Corp. cross-appeals

the district court ruling denying Adams’s claim of property damage, entering a

declaratory judgment, and imposing judgment in favor of the corporation based on

unjust enrichment. AFFIRMED IN PART AND REVERSED IN PART ON

APPEAL; AFFIRMED ON CROSS-APPEAL.

Patrick B. White of White Law Office, P.C., Des Moines, for appellant.

Michael J. Streit and Louis R. Hockenberg of Sullivan & Ward, P.C., West

Des Moines, for appellee.

Considered by Vaitheswaran, P.J., and Mullins and Ahlers, JJ. 2

AHLERS, Judge.

This appeal represents the latest chapter in the ongoing dispute between

Long Branch Maintenance Corp. (LBMC), an association of property owners, and

Nicole Adams, a property owner who signed a contract with LBMC. Adams began

this action by claiming LBMC damaged her property. LBMC answered with a

counterclaim, seeking a declaratory judgment that Adams is a member of LBMC

and requesting damages under a theory of unjust enrichment. The district court

denied the property-damage claim, entered a declaratory judgment finding Adams

was a member of LBMC, and awarded damages for unjust enrichment. We affirm

the denial of the property-damage claim and the grant of the declaratory judgment

in full, but we reverse the judgment based on unjust enrichment due to the contract

between the parties.

I. Background Facts and Proceedings.

In 2003, Adams purchased a home in the Diamondhead Lake

neighborhood. At that time, she signed a “Membership Agreement” (Agreement)

with LBMC wherein she agreed to be a member of and pay an annual assessment

to LBMC. Under the Agreement, LBMC agreed “to apply said membership

assessment to the operation of corporation as a non-profit organization whose

purposes are to assist in the betterment, cleanliness, maintenance and

beautification of Diamondhead Lake for the benefit of all members.” At the time of

trial, LBMC claimed 274 members. The amenities LBMC offers to its members

include providing and maintaining a 115-acre man-made lake with boat docks, two

parks with playground equipment, roads, and common areas. 3

Adams initially paid membership assessments, but she stopped paying in

2009. In October 2011, LBMC filed a small-claims action against Adams for her

unpaid assessments. The small-claims court ruled in favor of Adams, finding she

was not a member obligated to pay assessments to the corporation because

LBMC failed to record the Agreement, as required by the Agreement. The district

court agreed with the small-claims court on its review, and we affirmed. See Long

Branch Maintenance Corp. v. Adams, No. 12-2020, 2014 WL 467516, at *7 (Iowa

Ct. App. Feb. 5, 2014). LBMC eventually recorded the Agreement on

September 22, 2014.

On October 20, 2016, Adams began the current proceeding, filing a small-

claims action asserting LBMC was responsible for damaging her property. LBMC

answered and counter-claimed, requesting a declaratory judgment recognizing

Adams has been a member who owes assessments since LBMC recorded the

Agreement and seeking all unpaid assessments under a theory of unjust

enrichment. Due to the amount asserted in the counterclaim exceeding the

jurisdiction of small claims court, the case was transferred to district court. See

Iowa Code § 631.8(4) (2016) (authorizing the entire proceeding to be tried in

district court when a counterclaim is asserted in a small claims action that exceeds

the jurisdictional limit of small claims). Following a bench trial, the district court

issued its ruling on January 4, 2019. The court rejected Adams’s property-damage

claim, finding she failed to prove LBMC trespassed on her property or the amount

of any damages. As to LBMC’s claims, the court agreed Adams had been a

member since LBMC recorded the agreement on September 22, 2014. The court

did not award past assessments under the Agreement, finding LBMC failed to 4

prove its members approved the assessments, as required by the Agreement.

Regardless, the court found Adams owed damages to LBMC under the theory of

unjust enrichment, but the court disallowed damages arising prior to October 17,

2011, when Adams filed the prior small-claims action. The court awarded LBMC

damages of $16,863.26, equal to Adams’s total outstanding assessments since

October 17, 2011, plus interest, and the court denied LBMC’s request for attorney

fees. Both parties filed motions pursuant to Iowa Rule of Civil Procedure 1.904(2)

asking the court to reconsider various parts of its ruling. The court denied both

motions. Adams appeals, and LBMC cross-appeals.

II. Standard of Review

The district court tried the case at law. Accordingly, we review the property-

damage claim and request for declaratory judgment for correction of errors at law.

Iowa R. App. P. 6.907; Van Sloun v. Agans Bros., Inc., 778 N.W.2d 174, 178 (Iowa

2010) (“The court’s review of a declaratory judgment action depends upon how the

action was tried to the district court.”); Citizens Sav. Bank v. Sac City State Bank,

315 N.W.2d 20, 24 (Iowa 1982) (“[W]e will consider and review a case on appeal

in the manner it was treated below.”). “If substantial evidence in the record

supports a district court’s finding of fact, we are bound by its finding.” Iowa Mortg.

Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 2013). “However, a district

court’s conclusions of law or its application of legal principles do not bind us. Id.

“[A] claim for unjust enrichment is rooted solely in equitable principles.”

Iowa Waste Sys., Inc. v. Buchanan County., 617 N.W.2d 23, 30 (Iowa Ct. App.

2000). Accordingly, we review the unjust-enrichment claim de novo. Id. In de 5

novo review, we give weight to the fact findings of the district court, but we are not

bound by them. Iowa R. App. P. 6.904(3)(g).

III. Property Damage

Adams claims the district erred in denying her property-damage claim,

which the district court analyzed as a claim of trespass resulting in property

damage.1 A trespasser is liable for damages resulting from the trespass. See

White v. Citizens Nat’l Bank of Boone, 262 N.W.2d 812, 817 (Iowa 1978). Adams

asserts LBMC entered her land during a road construction project and caused

$3761.12 in damage to her property. LBMC’s maintenance worker testified he

performed all work from the road or an easement without trespassing on Adams’s

property. Jim Mazour, the president of the board of directors of LBMC, testified it

was more accurate to describe any change to Adams’s property as “ditch

restoration” rather than damage. LBMC also introduced photographs of the current

state of Adams’s property. From this evidence, the district court concluded Adams

failed to prove by a preponderance of the evidence LBMC trespassed onto her

property or the amount of any damage to her property. This evidence is sufficient

to support the district court’s conclusion, and we affirm the denial of her property-

damage claim.

1 Adams’s property-damage claim began in small claims court. In her brief to us, Adams asserts her cause of action for property damage is either intentional destruction of property or negligence. Because the district court only applied the theory of trespass to her property-damage claim and Adams raised no objection with the district court that her claim was being limited to a trespass claim, she has waived any claim of intentional destruction of property or negligence. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental doctrine of appellate review that issues must ordinarily be both raised and decided by the district court before we will decide them on appeal.”). 6

IV. Declaratory Judgment

Both parties appeal the district court’s declaratory judgment. We address

their arguments in turn.

A. Membership in LBMC

Adams claims the district court erred in finding she was a member of LBMC.

As an initial matter, she asserts LBMC “is not a viable entity of any kind,” which

precludes it from designating her as a member or claiming any amount for unpaid

assessments or unjust enrichment. While Adams asserts LBMC does not qualify

as a “homeowners association,” her counsel acknowledged at trial that the Iowa

Code does not define “homeowners association” and the term’s definition derives

from “common usage.” There is no dispute LBMC is a duly-organized nonprofit

corporation registered and in good standing with the State of Iowa. Nonprofit

corporations are capable of enforcing their contractual and legal rights. See Iowa

Code § 504.302(1) (2016) (granting a nonprofit corporation the power to “[s]ue and

be sued, complain, and defend in its corporate name”). We agree LBMC is a viable

entity capable of asserting its claims here.

Regarding her claim she is not a member of LBMC, Adams asserts LBMC’s

failure to record the Agreement bars it from requiring her to pay assessments. That

was the holding in the parties’ prior action before this court. See Long Branch

Maintenance Corp., 2014 WL 467516, at *7. However, that action involved the

time prior to LBMC recording the parties’ membership agreement. That deficiency

was cured when LBMC recorded the Agreement on September 22, 2014. As the

district court noted, there was no limitation in the Agreement or Iowa law “requiring

that a membership agreement had to be recorded within a specified time,” “Adams 7

was not prejudiced by the late recording,” and Adams “in fact substantially

benefitted” from the late recording. In short, the Agreement remained valid until

and after its recording on September 22, 2014. We agree LBMC’s prior failure to

record the Agreement did not prevent Adams from becoming a member after the

recording.

Adams also challenges her membership on the grounds that the corporate

president and secretary who signed her Agreement were not members at the time,

and, because they were not members, the Agreement cannot be valid. This

argument may fail for several reasons, but suffice it to say the district court found

“no convincing evidence that these two persons were not members.” The only

evidence Adams points to on this topic is her testimony that she could not find

recorded membership agreements for these persons. Sufficient evidence

supports the district court’s finding.

Next, Adams asserts she resigned as a member before her membership

took effect. She submitted an email to LBMC purporting to resign as a member on

July 23, 2011,2 well before LBMC recorded the agreement. Iowa Code section

504.621 allows a member of a non-profit corporation to “resign at any time,” but

this provision explicitly applies only to a “member.” Adams’s resignation and

arguments here make clear she does not believe she was ever a member of

LBMC, and, as explained above, we find she was not a member until the

Agreement was recorded. Because Adams was not a member at the time, we

2Adams wrote in her email to LBMC: “If it is proven in any way that I am a member, based on Iowa Non-Profit laws, I believe I can resign as a member. So in this case, I am submitting my resignation as of today as member of Long Branch Maintenance Corporation.” 8

agree her July 23, 2011 email was not effective as an “anticipatory resignation.”3

We find no error in the court’s ultimate conclusion that she was a member after

LBMC filed the Agreement on September 22, 2014.

B. Assessments Owed

In evaluating the contractual obligations under the Agreement, the district

court found LBMC did not prove the assessments it claimed Adams owed under

the Agreement “were approved by a majority of a quorum of members at a meeting,

as required by the bylaws.” LBMC points to Mazour’s testimony that LBMC’s

members approved the assessments in accordance with the bylaws. LBMC

argues this testimony establishes the assessments were properly approved and

the district court erred in failing to award damages under the Agreement in the

declaratory judgment.

It is important to remember the nature of LBMC’s counterclaim to the district

court. LBMC did not assert breach of contract, which would require it to prove it

performed all terms and conditions under the Agreement and the damages it

suffered due to Adams’s breach. See Iowa Mortg. Ctr., 841 N.W.2d at 111

(describing the elements of a breach-of-contract claim). Instead, LBMC sought a

declaratory judgment to establish obligations under the Agreement. “In general,

3 Furthermore, even if Adams were a member at the time she submitted her resignation, her resignation would not relieve her of her financial obligations to LBMC. See Iowa Code § 504.621(2) (“The resignation of a member does not relieve the member from any obligations the member may have to the corporation as a result of obligations incurred or commitments made prior to resignation.”). This is consistent with the declaratory judgment finding Adams “will continue to be obligated for financial obligations to” LBMC if she resigns in the future. Because we affirm the declaratory judgment as written, this language is binding if Adams resigns her membership in the future. 9

‘the purpose of the declaratory judgment is to resolve uncertainties and

controversies before obligations are repudiated, rights are invaded, or wrongs are

committed.’” Dubuque Policemen’s Protective Ass’n v. City of Dubuque, 553

N.W.2d 603, 607 (Iowa 1996) (quoting 22A Am. Jur. 2d Declaratory Judgments

§ 1, at 670 (1988)); see also Iowa R. Civ. P. 1.1101 (“Courts of record within their

respective jurisdictions shall declare rights, status, and other legal relations

whether or not further relief is or could be claimed.”). In Iowa, a party may request

a declaratory judgment that establishes a breach of contract and orders damages.

See, e.g., Smutz v. Cent. Iowa Mut. Ins. Ass’n, No. 07-0187, 2007 WL 3085794,

at *8 (Iowa Ct. App. Oct. 24, 2007) (affirming a declaratory order finding an

insurance contract covered property damage and ordering the insurer to pay for

the loss); see also Iowa R. Civ. P. 1.1101 (“A contract may be construed [by

declaratory judgment] either before or after a breach.”). However, nothing requires

a party seeking a declaratory judgment to also seek damages if available. Accord

Bormann v. Bd. of Sup’rs, 584 N.W.2d 309, 313 (Iowa 1998) (“[T]he fact that the

plaintiff has another adequate remedy does not preclude declaratory judgment

relief where it is appropriate.”).

In LBMC’s counterclaim to the district court, its prayer asked the court to

“declare and construe [Adams’s] obligation to pay the dues, fees, and

assessments incurred since September 22, 2014 as a result of her status as a

member” and generally requested “other relief as may be appropriate,” but it did

not request an award of damages as a result of her status as member.4 In its post-

4 LBMC’s counterclaim states LBMC: 10

trial brief, Adams asserted LBMC “is not making a claim for damages on the

Membership Agreement in this lawsuit,” noting the prayer only asserts “a right

hereafter to sue for past or future damages.” Accordingly, the district court’s

declaratory judgment language does not address any amount Adams currently

owes as damages, merely stating Adams is “obligated to pay dues, assessments,

fees late charges, interest and bank service fees, assessed by” LBMC.5

prays that the Court declare and construe Plaintiff’s status as a member of the Defendant; declare and construe Plaintiff’s obligation to pay the dues, fees, and assessments incurred since September 22, 2014 as a result of her status as a member of the Defendant; reserve jurisdiction to award supplementary relief in the event the Plaintiff violates the terms of the Defendant’s Membership Agreement and By-laws after its construction by the Court; that the Court adjudge that Defendant have a right hereafter to sue for past or future damages for the Plaintiff’s violation of the terms of the Defendant's Membership Agreement as herein construed; or in the alternative, if the Court determines the Plaintiff is not a member, declare and construe the Defendant’s obligation to continue to provide services to the Plaintiff and/or make its amenities available to the Plaintiff; and for such other relief as may be appropriate to adjudge and declare the rights of the parties. 5 The district court’s declaratory judgment language states in full:

Plaintiff, Nicole Adams, is hereby adjudged to be a member of [LBMC] and has been a member since September 22, 2014. As such, Nicole Adams is entitled to exercise all of the rights and privileges of a member under the articles of incorporation and bylaws of [LBMC], subject to the terms and conditions of those articles and bylaws, including terms and conditions which limit or restrict a member’s right to vote or use LBMC property for nonpayment of financial obligations. Nicole Adams is further obligated to pay dues, assessments, fees, late charges, interest and bank service fees, assessed by [LBMC] upon members consistent with its articles of corporation and bylaws including any restrictions imposed upon a member’s right to vote at corporate meetings or use corporate property for failure to timely pay dues, assessments and fees when due. If Nicole Adams resigns her membership in [LBMC], she will continue to be obligated for financial obligations to the corporation as provided in Iowa Code section 504.621(2). These financial obligations include all financial obligations imposed upon member[s] 11

Because LBMC did not request damages under the Agreement in its

counterclaim and failed to prove the assessments were properly approved, we find

no error in the court’s ultimate decision to not address the amount of assessments

owed in the declaratory judgment.6 Accordingly, we view the court’s discussion

of the assessments as nonbinding dictum—possibly to emphasize any damages

awarded were not owing under the Agreement—that finds LBMC did not prove the

amount of the assessments Adams owed solely for purposes of the declaratory

judgment proceeding. As a result, the declaratory judgment only establishes

Adams owes any assessments properly approved since September 22, 2014. The

declaratory judgment does not establish the amount of the assessments, nor does

the declaratory judgment establish the assessments were or were not properly

approved. LBMC is free, in a future proceeding, to assert breach of contract or

other claims arising from the Agreement that have not been previously pled.

V. Unjust Enrichment

“A claim for unjust enrichment ‘arises from the equitable principle that one

shall not be permitted to unjustly enrich oneself by receiving property or benefits

without making compensation therefor.’” Legg v. W. Bank, 873 N.W.2d 763, 771

(Iowa 2016) (quoting Ahrendsen ex rel. Ahrendsen v. Iowa Dep’t of Human Servs.,

of the corporation, including fees, assessments, dues, late charges, interest and bank service fees assessed by [LBMC] upon members consistent with its articles of incorporation and bylaws. 6 To the extent LBMC argues the court erred by finding it failed to prove the

assessments were properly approved, we find no error in the court’s decision that the president’s testimony alone was insufficient to prove the assessments. See State v. Thornton, 498 N.W.2d 670, 673 (Iowa 1993) (“The jury is free to believe or disbelieve any testimony as it chooses and to give weight to the evidence as in its judgment such evidence should receive.”). 12

613 N.W.2d 674, 679 (Iowa 2000)). “Unjust enrichment exists when (1) one party

is enriched (2) at the expense of the other, and (3) it would be unjust under the

circumstances for the enriched party to retain the benefit.” MidWestOne Bank v.

Heartland Co-op, 941 N.W.2d 876, 886 (Iowa 2020).

LBMC’s unjust-enrichment claims rest on the proposition Adams was

unjustly enriched by using LBMC’s amenities without paying for them like other

property owners in the Diamondhead Lake neighborhood. Adams advances

several arguments, but we find the existence of the Agreement is dispositive. “[A]n

express contract and an implied contract cannot exist with respect to the same

subject matter.” Kunde v. Estate of Bowman, 920 N.W.2d 803, 807 (Iowa 2018).

The Agreement is an express contract for LBMC to collect assessments from

Adams in order to recover the cost of amenities. LBMC cannot rely on unjust

enrichment when it failed to satisfy the conditions precedent for recovering from

Adams under its express contract with her. See id. LBMC cites a case where a

neighborhood cooperative successfully claimed unjust enrichment to recover the

cost of amenities from non-paying property owners, but the property owners there

had no contract with the cooperative. See Okoboji Camp Owners Co-op. v.

Carlson, 578 N.W.2d 652, 654 (Iowa 1998). Even if an express contract between

LBMC and Adams did not exist due to the unrecorded Agreement, the equities do

not support unjust enrichment where LBMC was entirely at fault for failing to record

the Agreement that would have obligated Adams to pay the assessments. See

SDG Macerich Properties, L.P. v. Stanek Inc., 648 N.W.2d 581, 583 (Iowa 2002)

(“Equity aids the vigilant, not those who forget to perform a legal duty.”); SDG

Macerich, 648 N.W.2d at 589 (“We hold equitable relief is not available for a 13

commercial party who, through its own carelessness, failed to exercise its option

to renew a lease agreement.”). Therefore, we deny LBMC’s claim of unjust

enrichment and reverse the district court on this issue. Unlike claims arising under

the Agreement, any future claims of unjust enrichment are barred by res judicata.

VI. Conclusion.

On Adams’s appeal, we affirm the denial of her property-damage claim and

the finding she was a member of LBMC after it recorded the Agreement on

September 22, 2014. However, we reverse the district court’s grant of judgment

in favor on LBMC based on unjust enrichment due to the express contract covering

membership assessments. On LBMC’s cross-appeal, we find no error in the

court’s failure to address the assessments in the declaratory judgment, and we

affirm the declaratory judgment as written.

AFFIRMED IN PART AND REVERSED IN PART ON APPEAL;

AFFIRMED ON CROSS-APPEAL.