Jorge Oscar Sanchez and Eligio Sanchez Estrella v. RR&A Holdings, LLC

IN THE COURT OF APPEALS OF IOWA

No. 18-1607
Filed August 21, 2019

JORGE OSCAR SANCHEZ and ELIGIO SANCHEZ ESTRELLA,
Plaintiffs-Appellants,

vs.

RR&A HOLDINGS, LLC,
Defendant-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Marshall County, James C. Ellefson,

Judge.

Jorge Sanchez appeals the district court order denying his petition for an

injunction of the enforcement of the forfeiture of a real estate installment contract.

AFFIRMED.

Brandon J. Buck of Moore, McKibben, Goodman & Lorenz, LLP,

Marshalltown, for appellants.

Gail E. Boliver of Boliver Law Firm, Marshalltown, for appellee.

Considered by Tabor, P.J., and Mullins and May, JJ.
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MULLINS, Judge.

Jorge Sanchez appeals the district court order denying his petition to enjoin

the enforcement of the forfeiture of a real estate installment contract with RR&A

Holdings, LLC (RR&A).1 Jorge challenges the sufficiency of the notice of forfeiture,

contends RR&A waived its right to the interest on delinquent payments, and argues

he should be granted more time to cure the default to avoid the forfeiture.

I. Background Facts and Proceedings

In July 2012, Jorge and Eligio entered into a real estate installment contract

with RR&A2 for the purchase of property in Marshalltown. The total purchase price

was $165,000.00—$155,000.00 for the real estate and $10,000.00 for personal

property in and on the property. The contract also required a down payment of

$15,000.00. Under the contract, the Sanchezes had to pay the remaining balance

in monthly installments until July 2013, when they would need to pay a final balloon

payment, in addition to a separate monthly payment for the property’s real estate

taxes. Other relevant portions of the contract provide:

12. TIME IS OF THE ESSENCE. Time is of the essence
in this Agreement. Failure to promptly assert rights of Seller herein,
shall not, however, be a waiver of such rights or a waiver of any
existing or subsequent default.
....
16. FORFEITURE. If Buyers (a) fail to make the payments
aforesaid, or any part thereof, as same become due; or (b) fail to pay
the taxes . . . ; or (e) fail to perform any of the agreements as herein
made or required; then Sellers, in addition to any and all other legal
and equitable remedies which they may have, at their option, may
proceed to forfeit and cancel this contract as provided by law
(Chapter 656 Code of Iowa). Upon completion of such forfeiture

1
Eligio Sanchez, Jorge’s father, was a party to the forfeiture and petition for injunctive
relief. He does not appeal.
2
Rich Jordan is the president and sole proprietor of RR&A.
3

Buyers shall have no right of reclamation or compensation for money
paid. . . .
17. FORECLOSURE AND REDEMPTION. If Buyers fail to
perform this contract, Sellers, at their option, may elect to declare the
entire balance immediately due and payable after such notice, if any,
as may be required by Chapter 654, The Code. . . .
....
19. INTEREST ON DELINQUENT AMOUNTS. Either
party will pay interest at the highest legal contract rate applicable . . .
on all amounts herein as and after they become delinquent and/or
cash reasonably advanced by either party pursuant to the terms of
this contract, as protective disbursements.

An addendum to the contract provided for a one-year extension of the terms if the

Sanchezes were unable to secure financing prior to July 2013. Any extension

would be filed as a modification agreement and provided RR&A would receive an

additional principal payment of $10,000.00 as consideration for the extension.

In June 2014, the parties signed a modification agreement, extending the

payments and terms to June 2016, at which time the final balloon payment would

be due. The Sanchezes claimed they made the additional $10,000.00 payment as

contemplated by the original contract and the resulting balance did not reflect credit

for the payment. RR&A claimed it waived the additional payment for the

modification. No evidence of the payment is found in the record. In July 2016, the

parties entered into a second modification agreement, extending the contract

terms to June 2017. Both modification agreements provided that all other terms

and conditions of the original 2012 contract not modified remained in full force and

effect.

In March 2017, the Sanchezes rented the property to a third party. The

agreement with the third party was a lease-to-buy. The Sanchezes hoped to sell
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the property to the third party after they paid and fulfilled the contract with RR&A.

The Sanchezes did not consult RR&A about the third-party arrangement.

During the entire term of the contract, the Sanchezes were admittedly

inconsistent in making payments in full and on time. By August 2017, the

Sanchezes stopped making any payments. The Sanchezes wished to pay off the

remaining balance, but the parties could not reach a consensus about the correct

balance. The Sanchezes believed the outstanding balance was $30,501.27 and

in May, Jorge tendered a cash payment to RR&A in that amount. RR&A rejected

the tender as it believed the outstanding total was over $100,000.00. After

negotiations, the parties were unable to agree on the balance due. RR&A hired

an accountant to prepare an accounting of the contract and determined the unpaid

balance was $87,922.01.

In January 2018, RR&A served the Sanchezes with a notice of forfeiture,

alleging they defaulted on the contract by failing to make the monthly payments

and failing to make the balloon payment when it became due. The notice reflected

an unpaid balance, including interest, of $87,922.01 and included a spreadsheet

from the accountant. The notice gave the Sanchezes thirty days to cure the

default, after which the contract would be forfeited.

In February, the Sanchezes petitioned the court to enjoin the enforcement

of the forfeiture, alleging the notice of forfeiture was insufficient under Iowa Code

chapter 656 (2018). They alleged the notice (1) incorrectly stated the contract

between the parties, (2) failed to provide a detailed accounting of the missed

payments, and (3) failed to provide the correct amount needed to remedy the

alleged missed payments. They alleged RR&A was claiming more money than
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what was due. On March 8, RR&A recorded an affidavit in support of the forfeiture.

On March 16, RR&A served the Sanchezes with a thirty-day notice of the

“Termination of Non-Residential Tenancy and Demand for Possession.” The

Sanchezes moved to stay the termination of the tenancy until the court resolved

the litigation over the forfeiture. After a contested hearing in April, the court granted

a temporary stay pending trial, which was scheduled for June.

The court filed its written ruling in August after a one-day trial. It found the

Sanchezes “failed to perform their payment obligations arising from the Real

Estate Contract with [RR&A] from the beginning.” The court rejected the

Sanchezes’ arguments about the sufficiency of the notice of forfeiture. It found

that, though the notice referred to the contract by the wrong date, it provided the

correct document reference number as required under Iowa Code section 656.2,

while the statute does not require the notice to state the date of the contract. The

court also rejected the Sanchezes’ contention that there was a misapplication of

funds earmarked to pay the taxes on the property. The court also rejected their

argument that RR&A waived its right to late fees, finding no evidence to support a

waiver. Based on these findings, the court denied the request for an injunction of

the forfeiture.

The Sanchezes filed a motion to reconsider, enlarge, or amend under Iowa

Rule of Civil Procedure 1.904(2), asking the court to provide them with a minimum

of sixteen days to cure the default identified in the notice of forfeiture. They also

requested the removal of RR&A’s affidavit in support of forfeiture from the

recorder’s office once they cured the default, credit for payments made over the

required amount for the property’s real estate taxes, and a finding that RR&A
6

waived its right to collect late fees. The court denied the Sanchezes’ motion in its

entirety. Jorge now appeals.

II. Analysis

“A request for an injunction invokes the court’s equitable jurisdiction,”

therefore “our review is de novo.” Matlock v. Weets, 531 N.W.2d 118, 121 (Iowa

1995); see Iowa R. App. P. 6.907. “We give weight to the district court’s findings

of fact, especially when considering the credibility of witnesses, but are not bound

by them.” Matlock, 531 N.W.2d at 121. “Injunctive relief is an extraordinary

remedy that is granted with caution and only when required to avoid irreparable

damage.” Skow v. Goforth, 618 N.W.2d 275, 277–78 (Iowa 2000).

A. Notice of Forfeiture

First, Jorge alleges the district court erred by failing to enjoin the forfeiture

based on defects in the notice of forfeiture. Jorge claims the notice does not meet

the requirements under Iowa Code section 656.2, specifically the notice does not

identify which payments the Sanchezes failed to make under the contract. As a

result, the Sanchezes were not put on notice as to each alleged default. He also

argues the notice does not include an accurate and true accounting of the balance

due under the contract, claiming the accounting attached to the notice is inaccurate

and did not follow the contract terms, resulting in a higher balance.

“[E]quity abhors a forfeiture,” therefore “forfeiture statutes are to be

construed strictly against a forfeiture, with the burden to show full and strict

compliance with the statutory procedures upon the party seeking forfeiture.”

Jamison v. Knosby, 423 N.W.2d 2, 4–5 (Iowa 1988). Even so, though “forfeitures
7

are not favored does not mean they will never be enforced.” Miller v. Am.

Wonderlands, Inc., 275 N.W.2d 399, 402 (Iowa 1979).

“Real estate contract forfeitures are governed by Iowa Code chapter 656.”

Jamison, 423 N.W.2d at 5. A vendor must serve a written notice of forfeiture that

“[r]easonably identif[ies] the contract by a document reference number and

accurately describe[s] the real estate covered” and “[s]pecif[ies] the terms of the

contract with which the vendee has not complied.” Iowa Code § 656.2(1)(a), (b).

To avoid the forfeiture, the vendee has thirty days from service of the notice to

perform the terms and conditions that are in default. Id. § 656.2(1)(c). “If the

default is not cured within thirty days, upon the filing of the notice of forfeiture with

the county recorder, the forfeiture is complete.” Koch v. Kostichek, 409 N.W.2d

680, 683 (Iowa 1987); see Iowa Code § 656.5.

Jorge first claims the notice is insufficient because it does not specify which

payments the Sanchezes failed to make under the contract and the attachment to

the notice does not readily identify the missing payments. On our review of the

notice, we find it does provide sufficient information. The notice states the

Sanchezes failed to make monthly payments and refers to the attached

spreadsheet. The spreadsheet identifies the dates of scheduled payments and

actual payments made, and the remaining balance after each payment. The notice

provides the total interest and principal the Sanchezes paid along with the amount

of unpaid interest and principal. Jorge concedes the failure to make timely monthly

payments. This evidence is sufficient proof of default to support the forfeiture.

Jorge also challenges the sufficiency of the notice based upon the

computation of the unpaid balloon payment. Even if the notice contained an error
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of the computation of the balloon payment, because the notice of forfeiture

contains at least one matter on which RR&A has a right to give notice of forfeiture,

the notice is sufficient. See Hampton Farmers Co-op. Co. v. Fehd, 133 N.W.2d

872, 875–76 (Iowa 1965) (determining that the notice of forfeiture is not invalidated

or nullified “if there is one specific matter in the notice which is sufficient to justify

a forfeiture” or “in [the] event the notice of forfeiture makes demand for more than

that to which the plaintiff is entitled”);3 see also In re Grady, 202 B.R. 120, 123

(Bankr. N.D. Iowa 1996) (“The fact that the notice inaccurately stated the amount

of payments in default does not render the notice a nullity.”). Jorge concedes this.

The district court observed:

If the [Sanchezes] had tendered either the amount conceded
in their brief, $82,875.01, or the amount shown by their alternate
amortization schedule, $86,499.01, such a tender might have
supported some equitable argument. They did not tender either of
those amounts; the $30,501.27 was grossly inadequate and creates
no equitable argument for [the Sanchezes].

“While it is true . . . that equity abhors a forfeiture, we agree . . . that it does not

abhor a forfeiture enough to override established legal principles.” May v. Oakley,

407 N.W.2d 569, 572 (Iowa 1987). We agree equity does not favor the Sanchezes

given their lack of any attempt at payment of the outstanding balance after the

notice of default, let alone the year before trial. As a result, we affirm the district

court’s denial of injunctive relief.

3
Jorge requests us to overrule Hampton Farmers, challenging the precedent that the
notice of forfeiture need not accurately state the amount due and payable. We decline to
do so and leave the task of overruling precedent to the supreme court as “it is the role of
the supreme court to decide if case precedent should no longer be followed.” State v.
Miller, 841 N.W.2d 583, 584 n.1 (Iowa 2014).
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B. Delinquent Payment Interest

Jorge also claims the court erred by finding that RR&A did not waive its right

to interest on delinquent payments, arguing that because RR&A never sought to

charge them with the additional interest provided for in the contract, it implicitly

waived its right to collect the interest. “Waiver applies when a party voluntarily

relinquishes a known right.” DuTrac Cmty. Credit Union v. Hefel, 893 N.W.2d 282,

292 (Iowa 2017). “The essential elements of a waiver are the existence of a right,

knowledge, actual or constructive, and an intention to relinquish such a right.” Id.

(quoting Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v.

Federated Mut. Ins. Co., 596 N.W.2d 546, 552 (Iowa 1999)). A waiver can be

express or implied. Id.

First, even if we were to find RR&A waived the interest on untimely

payments, it does not affect the validity of the forfeiture. The forfeiture is still valid

based upon the Sanchezes’ untimely payments, a fact they do not challenge. The

trial court also determined, and we agree, that no such waiver exists here. First,

there is no evidence of an undisputed waiver. Rather RR&A was lenient and

tolerant of the Sanchezes’ ongoing issues with timely payments, as seen by the

multiple modification agreements which allowed the Sanchezes more time to pay

off the contract. We find no evidence in the record of an intention by RR&A to

relinquish its right to the interest. In addition, the contract itself provides that,

though time is of the essence, RR&A’s failure to promptly assert its rights under

the contract is not a waiver of those rights, including its right to interest on

delinquent payments. As a result, we find no error.
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C. Additional Time to Cure Forfeiture

Finally, Jorge challenges the court’s denial of the Sanchezes’ request for

additional time to cure the forfeiture. He contends that the court’s denial was based

partly on the actions of RR&A and therefore out of the Sanchezes’ control,

specifically RR&A’s rejection of their May 2017 tender, the delay between the

tender rejection and the notice of forfeiture, and the disagreement between the

parties over the amount of the outstanding balance.

Iowa Code section 656.4 provides a vendee thirty days after completed

service of the notice of forfeiture to perform the breached terms identified in the

forfeiture notice. “The thirty-day forfeiture procedure is said to be a statutory

embodiment of the rule in equity that a ‘reasonable’ time must be allowed for a

defaulting party to perform.” Gottschalk v. Simpson, 422 N.W.2d 181, 184 (Iowa

1988). “Ordinarily, nothing is required to complete a forfeiture except the passage

of the thirty days after notice.” Id. at 183.

In a contract forfeiture situation, the contract vendor, once a notice
of forfeiture has been served, need not act, proceed, or enforce in
order to achieve forfeiture. In other words, nothing is expected or
required from the contract vendor. On the other hand, it is the
contract vendee who must act, proceed, or otherwise enforce its
rights under the contract by curing.

In re Vacation Vill. Ltd. P’ship, 49 B.R. 590, 593 (Bankr. N.D. Iowa 1984). “[T]he

recording of the forfeiture notice and proof of service is required only for

constructive notice purposes; it is not a condition precedent to the completion of

the forfeiture.” Gottschalk, 422 N.W. 2d at 183–84.

In denying the Sanchezes’ request for additional time, the district court

stated:
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The plaintiffs want an opportunity to cure their default now.
Fifteen months have passed since the default, and six months have
passed since the deadline set by the Notice of Default. Even if the
parties and the court were in agreement about the amount of the
default, there would be no equity in allowing the plaintiffs to restore
their good standing by now making a payment due fifteen months
ago when no payments have been made in the last year.

Upon our review, we agree. At the time of trial, the Sanchezes had made no

payments or even an attempt at a payment in over a year. Jorge argues RR&A

refused to allow him to review the payment records, but he failed to keep his own

records and admitted he made some payments in cash and he did not always

receive a receipt. Thus, he had no records to compare to RR&A’s accounting of

payments made. Further, even after RR&A served the Sanchezes with the notice

of forfeiture in January 2018, they made no attempt to cure the default despite the

undisputed fact that they failed to make the balloon payment when due. Their

excuses for failure to cure or even attempt to cure the default are inadequate to

require relief. Thus, we affirm the district court’s denial of additional time to cure

the default.

AFFIRMED.