Friday, December 3, 2021

Horseshoes, Hand Grenades and a $1,798.79 Shortfall

The Iowa Supreme Court affirmed in part, reversed in part and remanded a matter arising under the state redemption statute

Close only counts in horseshoes and hand grenades, not our redemption statute. An attorney representing a sophisticated investor underpaid the amount necessary to redeem farmland by at least $1,798.79 below the minimum owed of $1,938,799.79 (exclusive of costs). The district court ruled the redemption was timely and resolved the parties’ dispute over the interest rate by ruling that the contract default rate of 21% controlled, not the 4.25% nondefault rate. Both sides appealed, and we transferred the case to the court of appeals, which affirmed the 21% interest rate but held the attempted redemption was untimely.

We granted the attempted redeemer’s application for further review. On our review, we too affirm the district court ruling that the contractual default interest rate of 21% applies. We adhere to the letter of our redemption statutes and precedent and affirm the court of appeals decision requiring timely full payment of the amount necessary. We decline to grant equitable relief under these circumstances because to do so would undermine the predictability and certainty so important for the marketability of farmland after foreclosure.

Holding

We agree with the court of appeals and district court that the contract default interest rate of 21% applies, as urged by Mlady and the IBA, not the nondefault rate of 4.25%, as urged by Dougan. The underlying notes were in default, triggering the higher rate with no right to cure that restores the lower interest rate. And Dougan’s early partial payment of $1,690,000 to the clerk on March 30 did not reduce the daily accrual of interest.

We agree with the court of appeals that Dougan’s effort to redeem fails as untimely. The parties agree that based on the 21% interest rate and without the partial payment reducing the principal accruing interest, Dougan’s combined payments of $1,937,001 within the one-year redemption period fell short by $1,798.79, or 0.09277853% of the total amount ordered by the district court—$1,938,799.79. Close enough? The court of appeals correctly answered no. The governing statutes require timely payment in full, and our precedents do not allow postdeadline payments to make up the difference. 

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2021/12/the-iowa-supreme-court-close-only-counts-in-horseshoes-and-hand-grenades-not-our-redemption-statute-an-attorney-representi.html

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