Cases in Real Estate
is a weekly update on real estate law, with legal principles illustrated and
explained by lawsuits from around the country. The topics are wide-ranging for
appeal to a broad spectrum of readers including lawyers, homeowners, investors
and the general public. Andrea Lee Negroni, a Washington DC
attorney and legal writer with 25 years of experience in financial services and
mortgage law, contributes the case summaries.
Real Cases in Real Estate will learn and be entertained by lawsuits
involving nuisance, trespass, zoning violations, deed restrictions, title
insurance, public utilities, mechanics liens, construction defects, adverse
possession, foreclosure and eviction, divorce and marital property rights,
tenants' rights, and more. Real Cases in Real Estate uncovers the
unpredictable, amusing, and sometimes outrageous disputes between next-door
neighbors, contractors and homeowners, condo boards and residents, real estate
brokers and homebuyers, and zoning administrators and developers.
cited case summary highlights the essential law of the case and explains the
principal legal theories and concepts relevant to the outcome. Plain language
treatment makes Real Cases in Real Estate accessible to lawyers and
follow real estate law professionally or as a hobby, you'll find something new
and useful every week in Real Cases in Real Estate.
for the Week of January 15th, 2013
Iowa court voids mortgages given by elderly woman, finding elderly financial abuse by the owner's daughter and non-compliance with the homestead waiver statute.
Elsie Swanson owned a 120-acre farm in Webster County, Iowa for nearly 50 years. The property included her home. Elsie gave a power of attorney to her only child, Peggy. The general power of attorney permitted Peggy to act on Elsie's behalf, but forbade Peggy from making gifts to herself. In 2004, Peggy and her husband borrowed money from Citizens State Bank which was guaranteed by a mortgage on Elsie's farm.
In 2005 and 2006, Peggy used the power of attorney from her mother to create additional mortgages securing loans made to Peggy and her husband. The loans defaulted. Citizens sought foreclosure of Elsie's farm in 2009. Elsie claimed the mortgages were void because she did not have the capacity to contract, her daughter abused the power of attorney by making gifts to herself, and she had not waived the homestead exemption waiver on the farm.
The trial court found no evidence that Elsie was incompetent and disagreed that Peggy's signing the mortgage guarantee was a "gift" that violated the power of attorney. As to the homestead waiver, the trial court found Elsie had moved from her home and was living with her daughter, thereby abandoning the homestead. These findings resulted in a judgment for foreclosure. Elsie appealed.
The appeals court noted that the mortgage on Elsie's farm was signed when she was 82 years old and had memory loss. While noting that a bank is not required to assess the financial condition of its customer, the appeals court considered Elsie a "vulnerable older Iowan whose only child was in the process of taking financial advantage of her." Iowa statutes also require lenders to give a borrower notice of her homestead exemption and receive a written waiver, but the bank did not do this.
The appeals court rejected the finding that Elsie had abandoned her home. Even though she was living with her daughter, her possessions were still in her home and she had not established another homestead. "We would be hesitant to hold that an aging Iowan loses homestead rights because he or she needs care not available in his or her home, particularly where, as here, she leaves her possessions in the home."
The Citizens Bank mortgages on Elsie's home were declared null and void, because of the lender's noncompliance with the homestead waiver statute, and because Elsie's daughter violated the terms of the power of attorney by using her mother's property to make a gift to herself, that gift being the guarantee of personal loans. "The power of attorney was clear that while Peggy was given the right to mortgage Elsie's property, she was not given the right to mortgage it to make gifts that benefited her."
Citizens State Bank v. Ruebel, 2011 Iowa App. LEXIS 732 (July 27, 2011) [enhanced version available to lexis.com subscribers].
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