Opinion
No. 3-761 / 03-0469.
Filed December 24, 2003.
Appeal from the Iowa District Court for Marion County, Peter A. Keller, Judge.
Sheryl Kamerick appeals the district court's ruling that her homestead is not exempt from sale pursuant to Iowa Code section 561.21(1) (2001). AFFIRMED.
Steven P. Wandro and Sandra K. Lyons of Wandro, Lyons Baer, P.C., Des Moines, for appellants.
Richard K. Updegraff of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, for appellee.
Considered by Vogel, P.J., and Hecht and Vaitheswaran, JJ.
Sheryl Kamerick signed a loan guaranty agreement with Marion County State Bank to ensure "full and prompt payment" of farm operating loans obtained by her husband, Louis. She was not a signatory to these loans. Sheryl subsequently acquired property in Pella on which she and her husband built a home. She claimed a homestead exemption for this property.
The Kamericks soon learned that the bank intended to seek a sale of the Pella property to satisfy Louis's outstanding debts. They sought a declaratory judgment that Sheryl's homestead exemption protected the property from such a sale. Ruling on stipulated facts, the district court concluded that the homestead was not exempt from the bank's collection efforts because the loan guaranty agreement was consummated before Sheryl acquired the real estate. As the facts are not in dispute, our review is on error. Seeman v. Iowa Dep't of Human Serv., 604 N.W.2d 53, 56-57 (Iowa 1999).
Iowa Code section 561.16 (2001) provides that "[t]he homestead of every person is exempt from judicial sale where there is no special declaration of statute to the contrary." Section 561.21 sets forth certain exceptions to this general rule. This section provides that a homestead "may be sold to satisfy debts . . . contracted prior to its acquisition, but then only to satisfy a deficiency remaining after exhausting the other property of the debtor, liable to execution." Iowa Code § 561.21(1).
The Kamericks contend the obligation created by the loan guaranty agreement is not a "debt" within the meaning of Iowa Code section 561.21(1). They point to the contingent nature of a loan guaranty. While the Iowa Supreme Court has not addressed the precise question raised here, the court has considered and rejected similar arguments.
In In re Marriage of McMorrow, 342 N.W.2d 73 (Iowa 1983), the Iowa Supreme Court considered whether a parent's child support obligation was a "preexisting `debt' under Iowa Code section 561.21(1)." A father argued that his homestead was not subject to execution because "child support payments become a judgment only as they become due and not from the date ordered under the decree of dissolution." McMorrow, 342 N.W.2d at 75. The court rejected this argument and held that a child support judgment entered prior to the acquisition of the homestead was a "debt" and had become a debt at the time the divorce decree was entered. Id. at 77.
In In re Galvin's Estate, 238 Iowa 894, 895, 29 N.W.2d 230-31 (Iowa 1947), the Iowa Supreme Court considered whether a husband's prenuptial agreement requiring him to pay his wife if she survived him was a debt contracted prior to the acquisition of the homestead. The husband's heirs argued that "under the contract the debt did not exist until the death of" the husband Galvin's Estate, 238 Iowa at 895, 29 N.W.2d at 231. The court held that the debt was "`contracted' on the date of the contract and marriage." Id. The court stated, "[i]t is immaterial that it did not exist as a collectible debt until the death of" the husband Id.
In Smith v. Andrew, 209 Iowa 99, 101, 227 N.W. 587, 587 (Iowa 1929), the Iowa Supreme Court addressed the question whether a judgment against a bank stockholder was a debt contracted prior to his acquisition of a homestead. The stockholder argued that his liability was "wholly contingent" until the bank became insolvent. Smith, 209 Iowa at 101, 227 N.W. at 588. The court recognized that "the term `debt' is indefinite and variable in its meaning; and that the meaning to be attached thereto in a given case is largely dependent on its context." Id. The court also recognized that the homestead statute is to be construed liberally. Id. at 104, 227 N.W. at 589. The court nevertheless held that the stockholder's liability "originated as part of the contract of purchase of the stock" and was, therefore, an antecedent debt. Id. at 103-04, 227 N.W. at 589.
In Merchant's Nat'l Bank of Clinton v. Eyre, 107 Iowa 13, 77 N.W. 498 (Iowa 1898), the issue was whether a daughter's obligation as a surety was a debt that preceded her father's death. The court answered yes to this question. Eyre, 107 Iowa at 16, 77 N.W. at 499. Sheryl maintains that Eyre is inapposite because a surety's obligation, unlike a guarantor's, is primary rather than secondary. We are not persuaded that this distinction makes a difference in deciding whether an obligation is a debt under Iowa Code section 521.21(1). As the Court pointed out, resolution of the case did not turn on whether "as a general proposition, a surety is to be deemed a debtor" but on the fact that an indebtedness to the bank had long since been created. Id.
Based on these opinions, we conclude the loan guarantee agreement was a debt contracted prior to the acquisition of Sheryl's homestead and we find no error in the district court's conclusion that the homestead could be sold to satisfy outstanding debt after exhausting the debtor's other property.