Farm Borrowers Denied Request for Hearing to Set Aside Sheriff's Sale

On February 3, 2021, the Iowa Court of Appeals denied the request of farm borrowers to remand for a hearing on whether the district court should set aside the sale of their real property in a sheriff’s sale. The court found that any “irregularities” in the sale were due to the plaintiffs’ own actions.

Background

The plaintiffs borrowed over $1.3 million from a bank over two-year period secured with an agricultural real estate mortgage. After the plaintiffs fell behind on payments, the bank foreclosed. The bank moved for summary judgment and a foreclosure decree, which the district court granted.

Two years later, the property was sold in three parcels at the sixth attempt to hold a sheriff’s sale. The other sales had been postponed due to the plaintiffs filing bankruptcy petitions, considering loan modification, and accusing the bank of committing fraud. The three parcels were sold to the bank and another business without the right of redemption for a total of $1.6 million.

Three weeks later, the plaintiffs moved to have the sheriff’s sale set aside. They claimed that the sale of the land in three parcels was illegal and that the sheriff’s sale did not meet the relevant provisions in the Iowa Code. The plaintiffs did not request a hearing, and three days later the district court denied the petition because there was “no basis upon which to stop the sale.”

The plaintiffs filed a motion under Iowa Rules of Civil Procedure 1.904(2) claiming that they did not have proper notice and noting that the court issued a ruling without a hearing. The plaintiffs asked the court to reconsider at the upcoming hearing. The court denied the motion and did not set aside the sheriff’s sale.

Plaintiffs' Action Made Them Ineligible for Equitable Relief

The plaintiffs appealed, seeking a remand so that the district court could hold a hearing on the plaintiffs’ motion to set aside the sheriff’s sale. The plaintiffs claimed there were substantial irregularities in the sheriff’s sale which resulted in substantial prejudice to the plaintiffs.

The bank claimed that the plaintiffs had adequate notice of the sale and offered evidence of the plaintiffs’ filings to demonstrate this assertion. The bank argued that because the plaintiffs did not request a hearing on their motion to set aside the sale, they could not ask for one now. While the plaintiffs did claim to have additional information supporting their position, the bank claimed that a rule 1.904(2) motion must be based on information already in the record.

In denying the plaintiffs’ request to remand, the court stated that the plaintiffs chose to engage in deceptive practices that delayed the bank’s ability to collect on its judgment.  For example, the plaintiffs sought numerous “emergency” stays and filed several bankruptcy petitions within hours of the scheduled sheriff’s sales. The court found that these repeated delays of earlier sales over a span of two years were of the plaintiffs’ own making. The court ruled that because the borrowers did not engage in equitable conduct, they did not qualify for relief.  The court thus denied the plaintiffs’ request to remand for a hearing on the motion to set aside the sheriff’s sale and affirmed the district court’s judgment.