Opinion ID: 2033184
Heading Depth: 2
Heading Rank: 1

Heading: Iowa Jurisprudence

Text: Iowa has previously addressed the issue of jury trials in an equity case involving a trust. Carstens v. Cent. Nat'l Bank & Trust Co., 461 N.W.2d 331 (Iowa 1990). As is the case here, Carstens came before this court on interlocutory appeal after the plaintiffs' jury demands were denied. See id. at 332. However, the trust case was originally brought at law. Id. We held that because the trust beneficiaries' rights had not yet vested, the suit could only be brought in equity, and thus, plaintiffs were not entitled to a jury determination. Id. at 333-34. The relevant portion of the opinion is the court's discussion of the distinction between equity and law suits. Id. at 333. We stated: The commencement of an action at law or an action in equity does not provide or deprive a party of the right to a jury trial of issues ordinarily triable to a jury. Id. This statement was made in the context of a case improperly filed at law. That being said, we later concluded that no jury was warranted because the action was actually one in equity. Id. at 334. The court also stated: We look at the essential nature of the cause of action, rather than solely at the remedy, to determine if a party is entitled to a jury trial. Id. at 333 (emphasis added); see Moser, 312 N.W.2d at 895 (finding that the fact the remedy is legal in nature does not automatically take the case out of the purview of the equity court). This suggests that the remedy sought is of minimal importanceit is the nature of the cause of action, i.e., where the case is properly docketed, that is the deciding factor. It should be noted that in Carstens there was a dispute about what type of action the trust claim was, legal or equitable. See Carstens, 461 N.W.2d at 332-34. Here, it is clear that the nature of a shareholder's derivative suit is equitable only. See Holi-Rest, Inc. v. Treloar, 217 N.W.2d 517, 523 (Iowa 1974) (A shareholder's derivative action is equitable in nature.). This fact is admitted by the shareholders. Likewise, there is no common law counter-part to a derivative suit available to shareholders. The derivative suit exists only in equity. Moreover, because the nature is known here, Carstens has bearing on the present case only to the extent that the court held the remedy sought is not the deciding factor to obtain a jury. See Carstens, 461 N.W.2d at 333.
In their brief, the shareholders urge us to accept the proposition that [t]he essential character of a cause of action to determine whether the right to jury trial exists is the relief it seeks. In support of this statement, the shareholders cite Carstens. This is a misstatement of the court's holding in that case. As noted earlier, the court explained that it was the nature of the case itself rather than solely the remedy that tips the balance in favor of or against providing a jury. Id. The court found that even though the trust beneficiaries were seeking money damages, a legal remedy, because the case could only be founded in equity, there was no right to a jury. Id. at 333-34 (Generally, the remedies of a beneficiary against the trustee are exclusively equitable.... The district court correctly sustained the motion to strike the demand for jury.).
The shareholders also assert that a jury should hear legal defenses raised. Regarding legal defenses in equity, several Iowa cases have held: We have recognized that a defendant has no right to a trial by jury of law issues raised in the answer to an action properly brought in equity. Once equity has obtained jurisdiction of a controversy the court will determine all questions material or necessary to accomplish full and complete justice between the parties, even though in doing so the court may be required to pass upon certain matters ordinarily cognizable at law. In re Marriage of Stogdill, 428 N.W.2d 667, 670 (Iowa 1988); see also Grandon v. Ellingson, 259 Iowa 514, 518-19, 144 N.W.2d 898, 901 (1966) (Equity had jurisdiction of the controversy and the raising of defenses not solely cognizable at law did not give defendant the right to a law trial on these issues.... Equity may determine all matters both legal and equitable when the controversy is properly before it.). Similarly, if an action was brought at law, and an equitable defense raised, that would not invoke equity jurisdiction automatically. 27A Am.Jur.2d Equity § 5. It should follow then that invoking a legal defense in a shareholder's derivative suit does not defeat equitable jurisdiction.
Iowa does provide the right to a jury trial for defendants who assert a legal counterclaim in an equity action. See Conrad v. Dorweiler, 189 N.W.2d 537, 538-39 (Iowa 1971) (holding that this is true where the counterclaim raises severable issues); see also 27A Am.Jur.2d Equity § 235 (A defendant also may have a right to jury trial if he or she is required compulsorily to assert his or her legal counterclaim....). While Iowa courts have recognized that not all equity cases can proceed without a jury on every issue, we choose not to extend this holding to the plaintiffs in a shareholder's derivative suit.