Opinion ID: 1584853
Heading Depth: 2
Heading Rank: 3

Heading: Security

Text: The court of appeals found it inequitable to deny Jody security for the money Connie owes Jody. It granted an equitable lien against Alpha and all of its corporate assets. An equitable lien may be created when the predicate conditions for a judgment lien do not exist. Under Iowa Code section 624.23, judgments are automatic liens against the real estate owned by the judgment debtor. A judgment lien requires a final, valid and subsisting judgment by a duly authorized court for payment of a defined and certain amount. Schuling v. Tilley, 454 N.W.2d 899, 900 (Iowa Ct.App.1990) (citing Slack v. Mullenix, 245 Iowa 1180, 1184, 66 N.W.2d 99, 101 (1954)). Orders under a dissolution decree, if sufficiently defined and certain, are considered judgments and attach to real property as provided by section 624.23. Baratta v. Polk County Health Servs., Inc., 588 N.W.2d 107, 110-11 (Iowa 1999). The original decree satisfied the requirements for a judgment lien. It stated: In order to equalize the property division, Connie Keener shall pay Jody Keener a total of $6,780,650.00. This judgment in Jody's favor shall not carry interest. Connie shall pay Jody $600,000 per year by no later than May 1st beginning in the year 2006, until such time as the judgment is paid in full. (Emphasis added.) The quoted language provided a final judgment for a sum certain. Thus, Jody would have had a judgment lien against Connie's real property. The dissolution decree awarded Connie $2.06 million in real estate. The district court subsequently modified the decree so Jody only has a judgment for each $600,000 payment as it becomes due. The district court added the following language: Because the total judgment ordered herein to be paid by Connie Keener to Jody Keener involve periodic payments, judgments for the periodic payments, as ordered by the court, will become judgments of record as the periodic payments (or installments) are due. We think Jody is entitled to a judgment lien for the entire amount Connie owes him. We therefore remand this case to the district court so the language added to the decree via the July 5, 2005 order can be stricken. Jody will then have a judgment lien on Connie's real estate as provided by Iowa Code section 624.23. The judgment lien awarded to Jody shall be subordinate to any refinancing on any real estate subject to the judgment lien if the refinancing is for an amount equal to or less than the existing mortgage balance. Connie shall inform Jody in writing of any refinancing that occurs. If necessary, Jody shall execute and deliver to Connie any documents required to subordinate the judgment lien under the provisions of this paragraph. We now consider the appropriateness of an equitable lien. The court of appeals gave Jody an equitable lien against Alpha and its corporate assets. An equitable lien is a right not recognized at law, to have a fund or specific property, or its proceeds, applied in whole or in part to the payment of a particular debt or class of debts. Smith v. Village Enters., Inc., 208 N.W.2d 35, 38 (Iowa 1973) (quoting 51 Am.Jur.2d Liens § 22 (1970)). In other words, an equitable lien may be created when the predicate conditions for a judgment lien do not exist or where the debtor does not own sufficient real estate to satisfy the debt. An equitable lien merely requires a debt, a duty of one person to pay another person, and a res to which that obligation attaches. Fed. Land Bank of Omaha v. Boese, 373 N.W.2d 118, 121 (Iowa 1985) (quoting 53 C.J.S. Liens § 4(a) (1948)). Equitable liens may be placed on both real and personal property. See Nelson v. Pampered Beef-Midwest, Inc., 298 N.W.2d 281, 286 (Iowa 1980) (holding unsecured creditors had equitable lien which followed personal and real property into the hands of newly formed corporation); In re Marriage of Blume, 473 N.W.2d 629, 634 (Iowa Ct.App.1991) (upholding equitable lien on farm). In contrast, a judgment lien only attaches to real property. On further review, Connie overreacts to the court of appeals creation of an equitable lien. She claims attach[ing] an equitable lien to the business assets of a company is to place the creditor in full control of the company and prohibits a company from even paying a UPS driver or its employees. Connie's concerns are unfounded. Contrary to Connie's assertions, an equitable lien does not affect arms-length transactions made in the regular course of business. Luedecke v. Des Moines Cabinet Co., 140 Iowa 223, 229, 118 N.W. 456, 458 (1908); accord Nachazel v. Mira Co. Mfg., 466 N.W.2d 248, 253 (Iowa 1991); Nelson, 298 N.W.2d at 285-86; Smith, 208 N.W.2d at 39-40. Connie's misunderstanding may be due to the nebulous nature of an equitable lien, which is perhaps best suited for unjust enrichment situations. See Nachazel, 466 N.W.2d at 253. Nevertheless, a district court in a dissolution case has the authority to secure future performance by imposing an equitable lien. In re Marriage of Hettinga, 574 N.W.2d 920, 923 (Iowa Ct.App.1997). While an equitable lien is certainly appropriate in this case, we find a UCC lien to be a better mechanism to secure Jody's judgment under these circumstances where the main asset is corporate stock. See generally Siragusa v. Brown, 114 Nev. 1384, 971 P.2d 801 (1998). We therefore order Connie to execute all necessary papers to give Jody a lien in accordance with Iowa Code chapter 554. The lien shall only be against Connie's Alpha stock. The court of appeals erred by creating a lien against Alpha and its assets because Connie only owns stock in the company. The district court gave Connie the opportunity to pay Jody over time so she could continue to run Alpha as opposed to selling the business. However, if Connie does not make timely payments, then Jody is entitled to some recourse so he does not have to wait indefinitely for money that is rightly his. If Connie decides to sell her stock or discontinue the company's operation, we see no reason to delay Jody receiving his money. Thus, we find an acceleration clause to be appropriate. On remand, we direct the district court to add the following clause to the decree: Jody may elect to declare the whole amount due and collectible at once and proceed in any manner authorized by law to enforce the collection of the full balance declared due if any one of the following occurs: (1) Connie is more than one hundred and twenty (120) days late on any payment (including paying less than the amount owed), (2) Connie sells a controlling interest in Alpha (more than 50% of Alpha's stock), (3) Connie dissolves or liquidates the corporation, or (4) Connie otherwise jeopardizes Jody's security or secured interest. This acceleration clause shall become effective May 1, 2008 in order to allow Connie time to catch up on her payments.