Real Estate Practitioner's Forum: Iowa Supreme Court Overrules Heer v. Thola
On March 8th, 2024, the Iowa Supreme Court ruled on the contested dispute of Vaudt v. Wells Fargo Bank, N.A (2024 WL 995573 (Iowa Mar. 8, 2024)). This case began as a dispute about the Vaudts’ landscaping encroaching on their neighbor, the Enamorado’s, property which then transformed into a highly contested decision wherein the Iowa Supreme Court reversed Heer v. Thola, the controlling case law in this matter. Id. at *1, *6 (overruling Heer v. Thola, 613 N.W.2d 658 (Iowa 2000) (Heer)). The Vaudts acquired their property in 1991, and the Enamorados bought their property via a trustee’s deed in 2021, subject to a mortgage held by Wells Fargo. Vaudt, 2024 WL 995573, at *1. Plaintiffs (the Vaudts) petitioned for quiet title against the Enamorados, including two causes of action: boundary by acquiescence and adverse possession. Id.
Wells Fargo filed a motion to dismiss and argued the Vaudts’ claims were barred by the statute of limitations for actions arising from transfers of property by trustees, supported by Iowa Code § 614.14 (2009). Vaudt, 2024 WL 995573, at *1. The district court was “sympathetic to the [plaintiff]’s argument that their claims arose from the conduct of the Enamorados’ predecessors in interest – specifically their actions of acquiescing in the landscaping as defining the boundary between the properties—and therefore did not “arise out of” the transfer of the property via trustee’s deed.” Id. However, the district court decided it was bound by Heer which “held the one-year statute of limitations applied to a similar boundary-by-acquiescence claim.” Vaudt, 2024 WL 995573, at *1; Heer, 613 N.W.2d 658. The Vaudts appealed and requested the court reverse “Heer because its interpretation of § 614.14(5) constitutes manifest error.” Vaudt, 2024 WL 995573, at *1.
The Supreme Court analyzed § 614.14(5)(b) specifically and found that “while the Vaudts’ claims might fit within [the] definition of an adverse claim to the extent they claim an interest in the Enamorado’s property, § 614.14(5)(b) does not broadly apply to all adverse claims.” Id. at *3. Additionally, the Court noted the statute “makes clear the claim must arise from the instrument, i.e., trustee’s deed, the recording of which triggers the one-year limitation period.” Id.
To determine whether Heer’s interpretation of § 614.14(5)(b) was erroneous, the Supreme Court reviewed Heer which is factually similar to Vaudt. Id. at *2–3. Heer had sold property adjoined to hers to Thola via trustee’s deed and after Thola learned the boundary was off by 22 feet, Heer brought a claim to establish the boundary by acquiescence. Id. at *2. Similar to Vaudt, the defendant then argued the claim was barred by the one-year limitation. Id. The piece of Heer specifically analyzed by the Supreme Court in Vaudt was Heer’s argument that the limitation did not apply because her claim arose from the actions of Thola’s predecessor acquiescing the boundary line, not the transfer of property by a trustee. Id. Heer’s argument was rejected “based on [the district court]’s understanding that establishing a boundary by acquiescence is not self-executing, such that ‘judicial intervention is a requirement for establishing title by acquiescence.’” Id. (citing Heer, 613 N.W.2d at 661 (majority opinion)).
The Supreme Court found two major flaws with this reasoning. Id. at 4. First, the doctrine is “boundary [not ‘title’] by acquiescence,” and “it merely establishes a boundary between two adjoining parcels; it does not disturb title to property as the Heer court suggested.” Id. Second, the district “court’s focus on the need for judicial intervention led it to reason that but for the trustee’s deed, ‘this case would never have arisen.’” Id. (citing Heer, 613 N.W.2d at 622). However, the Supreme Court pointed out that is “not the causal connection required by § 614.14.” Id. Instead of identifying a “claim arising … by reason of a transfer of an interest in real estate by a trustee,” (which requires a connection between the claim and the trustee’s transfer, not merely between the “case” and the trustee’s transfer), § 614.14 narrowly focuses on claims specifically arising “by reason of” the trustee’s transfer, such as claims concerning the trustee’s affidavit, their authority to transfer, [etc.]. Id.
The Supreme Court also found Heer’s interpretation contrary to the basic operation of a statute of limitations where it bars cause of action based on acts, i.e., the filing of a trustee’s deed, that did not give rise to the legal elements of the claim. Id. “A claim ordinarily accrues, thereby triggering the relevant limitations period, when a plaintiff has a complete and present cause of action.” Id. (citing 51 Am. Jur. 2d Limitations of Actions § 128, West (database updated Feb. 2024)). Therefore, even if the case would not have been brought but for the transfer of property by trustee’s deed, the plaintiff’s cause of action accrued when the underlying elements of the claim occurred. Id. (citing 51 Am. Jur. 2d Limitations of Actions § 126)). As discussed by the Supreme Court, § 614.14(5)(b) applies to claims arising from the instrument (trustee’s deed & its recordation) – which reinforces the causal connection between a statute of limitation and accrual of the particular applicable claim. Id. Boundary-by-acquiescence “is the mutual recognition by two adjoining landowners for ten years or more than a line, definitely marked by fence or in some manner, is the dividing line between them.” Id. at *5 (citing Sille v. Shaffer, 297 N.W.2d 379, 381 (Iowa 1980)). The Supreme Court brought its analysis to a conclusion stating “a boundary-by-acquiescence claim arises from the conduct and consent of two-adjoining property owners” and “there is no inherent legal connection between the underlying cause of action and the trustee’s deed to support the Heer court’s application of § 614.14(5)(b) to a boundary by acquiescence claim.” Id. The Supreme Court, therefore, overruled Heer stating, “Heer erroneously interpreted the plain language of § 614.14(5)(b) to improperly eliminate certain boundary-by-acquiescence claims using reasoning that distorts the acquiescence doctrine. Our court is unanimous on this point.” Id. at *6.
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For more information on commercial real estate matters, contact John F. Fatino at (515) 288-6041 or by email. Abigail Goulding, Drake University Law School J.D. candidate, assisted in the preparation of these materials.