Case Reviews

MetaBank v. Estate of Boesen

Iowa Court of Appeals

Case Citation: 810 N.W.2d 532 (Iowa Ct. App. 2012)

Background: In 2005 Edward Boesen entered into an installment contract for the purchase of a warehouse in Urbandale, Iowa from Denny Elwell Family, L.C. (Elwell).  Edward formed Boesen Hickman, L.L.C. who then obtained a loan from First National Bank Midwest (FNBM). FNBM issued a check to Elwell for $1,308,975.40 on January 31, 2006, satisfying Edward’s obligations under the installment contract.  In 2006, Fidelity Bank agreed to loan funds to Boesen Hickman to pay the FNBM note in full and for ongoing constructing expenses.  This note was again secured by a mortgage on the property.  In 2007, MetaBank entered into a “Commercial Promissory Note” with Boesen Hickman for $3,920,000 to pay the Fidelity Bank loan and for other personal investments of Edward.  In July of 2008, Edward died intestate leaving Maureen as his surviving spouse. The MetaBank mortgage thereafter fell into default. MetaBank issued a notice of default and filed its petition to foreclose the mortgage.  The bank sought judgment for the $3,784,817.34 remaining due on the note, interest, late charges, attorney fees, and costs.

Maureen argued that upon Edward’s death, she “took ownership of the warehouse property free of all debts and encumbrances as a result of her statutory dower interest under Iowa Code section 633.211.”  The court agreed with MetaBank’s position, finding (1) a “surviving spouse cannot assert a dower interest against the seller or against one who stands in the shoes of the seller, for example, by virtue of having paid the purchase price,” and (2) “no dower interest comes into existence when the deceased spouse held the property for the benefit of another or took title merely as an intermediary.”

Issues: Whether a surviving spouse’s dower interest, under Iowa Code section 633.211, is subject to a nonpurchase-money mortgage that refinanced an existing mortgage and advanced new funds?

Analysis:  The priority of purchase-money mortgages over a spouse’s statutory dower interest is a long-standing and well-accepted proposition. Here, however, the court was not dealing with a purchase-money mortgage.  The mortgage held by MetaBank was used to refinance the mortgage held by Fidelity Bank, which in turn had been used to refinance the original mortgage held by FNBM. Additional money was advanced to Boesen Hickman under both the MetaBank mortgage and the Fidelity Bank mortgage for renovation of the property.

Under Iowa Code section 654.12B (2), “a mortgage given to secure funds which are used to pay off another mortgage is not a purchase-money mortgage,” except when the mortgage “is a refinancing of an existing purchase money mortgage between the same lender and purchaser and no new funds are advanced.” 

MetaBank nevertheless argued “Maureen cannot claim a dower interest superior to MetaBank because Ed Boesen never paid Elwell for the warehouse property and MetaBank claims through the entity—i.e., Boesen Hickman—that did pay the purchase price.” The Court agreed with MetaBank and concluded, as the district court did, that this case is controlled by the supreme court’s opinion in Barnes v. Gay, 7 Iowa 26 (1858).

The Court agreed with MetaBank’s interpretation of Barnes, "that the deceased spouse’s failure to pay the purchase price prevents the surviving spouse from claiming dower not only against the immediate contract seller but against any party who stands in the shoes of the seller by virtue of having paid off the contract."

Though dower is favored by the courts, “it is not to be allowed at the expense of clearly inequitable results, unless the statute clearly requires it.” Sullivan v. Sullivan, 139 Iowa 679, 687, 117 N.W.1086, 1089 (1908). To allow Maureen a statutory dower interest in the full value of the property “free and clear” of MetaBank’s claim for $3.7 million would, as the Court believed, “work manifest injustice and wrong.” Id.  Thus, as MetaBank argued, “Maureen cannot take the warehouse property free and clear as dower because Ed Boesen, having failed to personally pay for the property, never held the property free and clear.” 

Judgment: Affirmed the judgment of the district court granting MetaBank’s foreclosure petition.

To see the Court’s complete opinion, click here.