Debtor’s failure to bring claims as counterclaims rendered argument moot after full satisfaction

Lenders who are faced with debtors who plead inartfully should pay close attention to First Midwest Bank v. Breckenfelder, No. 13-2064 (Iowa Court of Appeals Nov. 25, 2015), a recent case in which the Iowa Court of Appeals held that debtor’s failure to bring a counterclaim rendered his arguments moot as defenses after full satisfaction.

The debtor filed no counterclaims, but argued as affirmative defenses that First Midst’s illegal conduct created offsets and damages. First Midwest was granted summary judgment. The debtor appealed. While the appeal was pending, First Midwest released its judgment, noting full satisfaction and full payment.

The debtor admitted that full satisfaction rendered the foreclosure claims moot, but the debtor on appeal argued that he still wanted his claims as to the bank’s illegal conduct to be tried.

However, since the debtor did not file a counterclaim, the Court of Appeals found that the claims were moot. The Court noted that the debtor could have had a separate trial, had the debtor filed a counterclaim instead of merely stating his arguments as defenses and offsets.

Lenders should take note of First Midwest Bank v. Breckenfelder. Debtors often argue that their pleadings should be construed liberally; First Midwest Bank v. Breckenfelder reinforces the importance of careful pleading. For questions regarding First Midwest Bank v. Breckenfelder, or regarding estate mortgage foreclosures, contact Mollie Pawlosky.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.