On Friday, November 18, the Iowa Supreme Court ruled that a purchase money mortgage trumped the widow’s dower interest, but that the surviving spouse’s dower interest was superior to the estate and general creditors in any surplus proceeds. The Court handed these rulings down in Freedom Financial Bank v. Estate of Bosen, No. 09-0397 (Iowa 11/18/2011). The court framed the ultimate question this way:
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.
In this particular case, the decedent had forged the spouse’s signature. The surviving spouse argued that the decedent could not divest the spouse’s dower interest by fraud. The appellate courts, however, disagreed with the premise of the argument. In affirming the Iowa Court of Appeals, Justice Waterman, writing for the Iowa Supreme Court, agreed with the Court of Appeals and the District Court that neither the decedent nor his surviving spouse ever had an interest in the property greater than the purchase money mortgage. The superiority of the “purchase money mortgage” is enshrined in statute in Iowa Code § 654.12B.
If this reasoning sounds familiar, it should. It is the same reasoning used by the Court of Appeals ruling that the purchase money mortgage trumped the homestead in JP Morgan Chase Bank v. Hawkins, No. 0-959 / 10-1015 (Iowa App. 2/23/2011). See Whither the Homestead? Iowa Code § 654.12B wins again.
The Supreme Court went on to evaluate whether the surviving spouse or the estate should have the surplus funds. The Court had to evaluate sections 633.211 (surviving spouse’s share), 633.218 (selection of property), and 633.350 (charge of debts and expenses against property). In reviewing the history of these sections and the caselaw over more than 120 years, the Court concluded:
Reading the provisions together demonstrates the legislature’s intent that the surviving spouse takes her statutory dower interest in real estate free and clear of the decedent’s debts.
