Freedom Fin. Bank v. Estate of Boesen

• Decision Date: 18 November 2011
• Docket Number: No. 09–0397.,09–0397.
• Citation: 805 N.W.2d 802
• Parties: FREEDOM FINANCIAL BANK, Appellee, v. ESTATE OF Edward J. BOESEN, Appellant,andMaureen A. Boesen, Appellant.
• Court: Iowa Supreme Court

805 N.W.2d 802

FREEDOM FINANCIAL BANK, Appellee,
v.
ESTATE OF Edward J. BOESEN, Appellant,andMaureen A. Boesen, Appellant.

No. 09–0397.

Supreme Court of Iowa.

Nov. 18, 2011.

[805 N.W.2d 804]

James R. Monroe, Des Moines, for appellant Estate of Edward J. Boesen.

Adam C. Van Dike of Connolly O'Malley Lillis Hansen Olson LLP, Des Moines, and Jerrold Wanek of Garten & Wanek, Des Moines, for appellant Maureen A. Boesen.

Louis R. Hockenberg and Benjamin M. Clark of Sullivan & Ward, P.C., Des Moines, for appellee Freedom Financial Bank.WATERMAN, Justice.

The forgery of a spouse's signature on a mortgage complicates this foreclosure dispute between creditors and the widow over her deceased husband's commercial real

[805 N.W.2d 805]

estate. Venerable precedent dating back to the 1870s guides our resolution of the parties' competing claims and helps harmonize seemingly conflicting provisions of the probate code. Specifically, we must decide whether a surviving spouse's dower interest—codified in Iowa Code section 633.211 (2009) as to nonhomestead real property—is subject to either a lender's purchase-money mortgage or the other debts and charges of the estate of the spouse who died intestate.

Edward J. Boesen obtained a purchase-money mortgage from Freedom Financial Bank to invest in commercial real estate in Ankeny, Iowa. The signature of his wife, Maureen, was forged in executing the purchase-money mortgage. After Edward's death, Freedom Financial attempted to foreclose its mortgage, but Maureen and the Boesen Estate asserted Maureen's fraudulent signature voided the mortgage.

The district court granted Freedom Financial summary judgment, concluding its purchase-money mortgage was superior to Maureen's statutory dower interest and the estate's other debts and charges. The district court ordered any excess sale proceeds to be paid to the estate, not Maureen. The court of appeals affirmed the district court's award of summary judgment to Freedom Financial, but reversed the district court's determination that the foreclosure sale surplus be paid to the estate and instead held Maureen's statutory dower interest took priority over the estate's other debts and charges. On further review, we affirm the court of appeals decision. This is the result at common law that the applicable provisions of the probate code embrace.

I. Factual and Procedural Background.

On May 25, 2007, Edward Boesen purchased commercial real estate in Ankeny. The deed conveyed the land “to Edward J. Boesen, a married person” and was recorded in the Polk County Recorder's Office the same day. To finance the purchase, Edward obtained a $232,000 loan from Freedom Financial and executed a promissory note for $232,000 and a mortgage securing $290,000 in loans and advances on the Ankeny real estate. The mortgage was recorded within a minute of the deed. The loan documents Edward signed contained a purchase-money mortgage recital and expressly waived all dower interests. Edward's signature and Maureen's purported signature on the mortgage were acknowledged by a notary public. Maureen claims her signature was forged. The record contains no details as to the forgery.

Edward died intestate on July 15, 2008, leaving Maureen as his surviving spouse. Edward and Maureen had four children together. After Edward's death, the mortgage fell into default; Freedom Financial issued a notice of default and then filed its petition to foreclose the mortgage on August 7, 2008.

Freedom Financial's petition asserted its mortgage was superior to all other claimants' interests in the Ankeny real estate. The bank sought judgment for the $228,056.42 remaining on the promissory note and for attorney fees and costs as provided for in the promissory note and mortgage. Maureen and the estate filed answers and raised affirmative defenses, contending the mortgage was void because Maureen did not execute the mortgage and Edward could not unilaterally convey her statutory dower interest.

Freedom Financial moved for summary judgment. The bank did not challenge the allegations Maureen's signature was forged, but argued its purchase-money mortgage nevertheless remained superior to Maureen's statutory dower interest.

[805 N.W.2d 806]

Maureen resisted the motion and cross-moved for summary judgment on grounds she never executed the mortgage and Edward could not sign away her statutory dower interest in the Ankeny property. The estate moved for summary judgment, alleging Maureen's fraudulent signature rendered Freedom Financial's mortgage invalid as to Maureen's interest in the property. The estate also asked the court to subject Maureen's statutory interest in the real estate to its debts and charges.

On January 26, 2009, the district court granted Freedom Financial summary judgment and entered judgment against the estate in the amount of $228,056.42 plus interest, court costs, attorney fees, and other advances made by the bank. The district court ruled that, under Iowa Code section 654.12B, the bank held a purchase-money mortgage superior to “any other right, title, [or] interest ... arising through, or under Edward.” The district court concluded that Maureen's statutory dower right was a real property interest arising through Edward. The district court also ordered any foreclosure sale surplus to be paid to the estate—implicitly concluding Maureen's statutory dower interest under section 633.211 was subject to the estate's debts and charges. On February 25, 2009, the district court entered a decree of foreclosure.

Later that day, the district court filed a supplemental order rejecting Freedom Financial's contention that its mortgage entitled its nonpurchase-money advances to Boesen to receive purchase-money priority. After the bank sought clarification, the district court filed a March 16, 2009 order reiterating that the estate is entitled to any foreclosure sale surplus, but that Freedom Financial's secured nonpurchase-money advances retain their priority vis-à-vis other estate creditors.

The estate appealed the district court's summary judgment order, its foreclosure decree, and its supplemental order. Maureen filed a “cross-appeal” appealing all rulings. The case was transferred to the court of appeals. The court of appeals affirmed the district court's foreclosure decree in favor of Freedom Financial, but reversed the district court's order awarding the sale surplus to the estate. The court of appeals held Maureen's statutory dower interest in the real property was free and clear of the estate's other debts and charges. We granted the estate's application for further review.

II. Standard of Review.

Foreclosure proceedings are typically tried in equity. Iowa Code § 654.1; First Fed. Sav. & Loan Ass'n of Storm Lake v. Blass, 316 N.W.2d 411, 415 (Iowa 1982). This appeal, however, is from an order granting summary judgment and related supplemental orders. Our review, therefore, is for correction of errors of law. Baratta v. Polk Cnty. Health Servs., Inc., 588 N.W.2d 107, 109 (Iowa 1999).

III. Purchase–Money Mortgage Priority.

Maureen and the estate contend her statutory dower share provides her an interest in the Ankeny real estate superior to Freedom Financial's purchase-money mortgage. The dower statute, Iowa Code section 633.211(1), provides in pertinent part:

If the decedent dies intestate leaving a surviving spouse and leaving no issue or leaving issue all of whom are the issue of the surviving spouse, the surviving spouse shall receive the following share:

1. All the value of all the legal or equitable estates in real property possessed by the decedent at any time during

[805 N.W.2d 807]

the marriage, which have not been sold on execution or by other judicial sale, and to which the surviving spouse has made no relinquishment of right.

(Emphasis added.) Maureen and the estate argue her statutory dower interest attached to the Ankeny property when Edward purchased the land, and he could not unilaterally convey away her dower interest in real property. Maureen and the estate also assert Freedom Financial's mortgage was improperly recorded and is therefore invalid.

A. The Purchase–Money Mortgage is Superior to the Statutory Dower Interest. On appeal, the parties agree Freedom Financial's mortgage was a purchase-money mortgage. Iowa Code section 654.12B(2) defines a purchase-money mortgage as:

Taken by a lender who, by making an advance or incurring an obligation, provides funds to enable the purchaser to acquire rights in the real estate, including all costs in connection with the purchase, if the funds are in fact so used.

Freedom Financial loaned Edward $232,000 to purchase the real estate for investment purposes. By statutory definition, the instrument he signed was a purchase-money mortgage. The mortgage contained a recital clause stating, “This is a purchase-money mortgage as defined by Iowa law.” Section 654.12B states a recorded purchase-money mortgage has “priority over and is senior to preexisting judgments against the purchaser and any other right, title, interest, or lien arising either directly or indirectly by, through, or under the purchaser.” This provision codifies the common law rule that a purchase-money mortgage had “preference over previous judgments against the purchaser-mortgagor.” Keefe v. Cropper, 196 Iowa 1179, 1181, 194 N.W. 305, 306 (1923).

Undaunted, Maureen and the estate argue her statutory dower interest is superior to the bank's purchase-money mortgage because Maureen did not sign the mortgage, and Edward cannot unilaterally convey her statutory dower interest they claim attached when Edward purchased the land. Maureen and the estate rely on a line of cases that hold a decedent cannot unilaterally divest the surviving spouse's statutory dower interest. In Warner v. Trustees of Norwegian Cemetery Ass'n, a husband conveyed real property to a third party without his wife's knowledge. 139 Iowa 115, 117, 117 N.W. 39, 42 (1908). Upon the husband's death, the...