In 2007, Edward J. Boesen purchased an investment property using a $232,000 mortgage from Freedom Financial Bank ("Freedom"). The promissory note expressly stated that the mortgage would be used to purchase the property, and the mortgage was recorded on the same day as the deed was transferred from the property’s seller to Boesen.
Up to around $60,000 in advances were permissible under the note, which was purportedly signed by Boesen and his wife, Maureen A. Boesen.
In 2008, he passed away without a will or trust.
At the time of Boesen’s demise, the mortgage payments were in arrears; the month following his death, Freedom filed suit against Edward’s estate and Maureen, individually, seeking to foreclose on the property.
Freedom filed for summary judgment, alleging that there were no facts in dispute and it should be allowed to foreclose. Maureen objected on grounds that she did not sign the mortgage and, thus, had inherited the property free and clear of the mortgage. The estate also objected to the foreclosure on grounds that Maureen had not signed the mortgage, but the estate argued that the property was subject to the liabilities of the estate.
The trial court found that Maureen had not signed the mortgage papers, but that the mortgage lien was still valid against the property. Accordingly, the trial court entered an order in favor of Freedom, foreclosing on the property and ordering any surplus from the foreclosure sale to become part of the estate. Both Maureen and the estate appealed the trial court’s ruling.
The Iowa Court of Appeals affirmed the foreclosure order, but reversed the lower court’s determination that any excess from the foreclosure sale should be directed to the estate.
Under Iowa law, the mortgage would have priority over Maureen Boesen’s rights as an heir and the rights of the estate only if it were a purchase-money mortgage. The court rejected her argument that the mortgage did not qualify as a purchase-money mortgage, on grounds that widow’s rights arise by implication of law, not "directly or indirectly by, through, or under the purchaser."
The mortgage expressly stated that it was a purchase-money mortgage, the mortgage funds were used to purchase the property, and Mr. Boesen’s "ability to purchase the property appears to have been contingent on the execution of the purchase-money mortgage." Accordingly, it would be inequitable for Maureen to take the property free of the purchase-money mortgage, especially since Freedom believed it had obtained her signature on the paperwork.
The court went on to reject the estate’s argument that the property was subject to Edward’s outstanding debts. The court agreed in principle with the estate that it was an absurd result for an intestate decedent’s spouse to inherit real property free and clear of the decedent’s bills, while Iowa state law expressly provided that property inherited by the spouse/heir of a decedent who died with a will would be subject to the deceased spouse’s liabilities.
However, the express language of Iowa Code section 633.211 and case law interpreting the statute did dictate "that the interest of a widow in the lands of her deceased husband is not subject to debts and charges against his estate," so if the Legislature desired a different result, the appellate court opined, it would need to expressly so state in law.
In the final analysis, the Iowa Court of Appeals upheld the foreclosure, and ordered that any excess proceeds from the foreclosure sale would go to Maureen, not the Boesen estate.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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