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Earlham Savings Bank v. Morrell

Court of Appeal of Iowa

July 10, 2013

EARLHAM SAVINGS BANK, Plaintiff-Appellee,
STEVEN L. MORRELL and JANICE CLAIR, Defendants-Appellants,

Appeal from the Iowa District Court for Dallas County, Gary G. Kimes, Judge.

The defendants appeal the district court's ruling granting Earlham Savings Bank's foreclosure petition.

S.P. DeVolder of The DeVolder Law Firm, Norwalk, for appellants.

Chet A. Mellema and Thomas M. Boes of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellee.

Heard by Doyle, P.J., and Bower, J., and Huitink, S.J. [*]


In this mortgage foreclosure action, the defendants Stephen Morrell and Janice Clair appeal the district court's judgment and decree of foreclosure in favor of Earlham Savings Bank. The defendants contend the district court erred in finding (1) Clair's signature was not required on the mortgage because the defendants did not prove they had a common-law marriage at the time the mortgage was formed; (2) the mortgage secured Morrell's first and second loans; and (3) Earlham Savings Bank established Morrell had defaulted and the amount of the default. We affirm.

I. Scope and Standards of Review.

"Review of an equitable claim to foreclose a mortgage is de novo. In equity cases, especially when considering the credibility of witnesses, the court gives weight to the fact findings of the district court, but is not bound by them." Iowa State Bank & Trust Co. v. Michel, 683 N.W.2d 95, 98 (Iowa 2004) (internal quotation marks and citation omitted).

II. Background Facts and Proceedings.

Steven Morrell and Janice Clair began a relationship in 2000, and they began living together in Morrell's residence in Waukee shortly thereafter. Both had previously been married. In 2003, Morrell purchased from his parents the residential property in which he and Clair lived. The warranty deed from the purchase specifically conveyed the property to "Steve Morrell, a single person." Morrell and Clair have never obtained a marriage license, nor have they had a marriage ceremony.

Morrell owned a business specializing in heating and cooling systems. Since its opening, the business used Earlham Savings Bank as the business's lender. The business's main contact with the Bank was Loan Officer James Adkins. The business also had a corporate checking account with the Bank.

In March 2008, Adkins informed Morrell that the business's corporate checking account was overdrawn by $75, 000. Adkins requested that Morrell come to the Bank and take care of the overdrafts, and it was proposed that Morrell take out a home equity loan against the equity in his residential property to cover the overdrafts.

Morrell then applied for a home equity loan with the Bank. Morrell met with Atkins, and Morrell provided his partially completed loan application form to Adkins. The form asked for the applicant's marital status, but Morrell had not checked any box to indicate his status. It is undisputed that Atkins checked the "unmarried" box on the application for Morrell. However, the parties dispute the conversation Adkins and Morrell had concerning his marital status prior thereto.

Ultimately, Morrell's home equity line of credit from the Bank was approved with a credit limit of $75, 000. Before closing on the loan, the Bank had a title search completed to ensure that Morrell's home was free from title defects and encumbrances. The title company provided a certificate to the Bank, which indicated the property had been transferred to "Steve Morrell, a single person." Additionally, Morrell provided his 2006 U.S. individual income tax return to the Bank. The filing status on the return indicated Morrell was the "head of the household." The "single" and "married" statuses were not checked on the return. In the exemptions section of the return, the "spouse" box was not checked. However, Morrell listed Janice Clair, along with the couple's child born in 2006, as dependents. Under the "Dependent's relationship to you" column, Morrell's return stated "other" for Clair.

As security for the line of credit, the Bank took a security interest in "a real estate mortgage dated March 26, 2008." The first page of the loan document prepared by the Bank stated the line of credit was a "consumer credit transaction." Additionally, the loan documents indicated the borrower was "Steven L. Morrell, " and Morrell signed for the loan. No other signature for a borrower was requested or received. Atkins signed the loan documents for the Bank.

In conjunction with the loan, Morrell executed an open-end mortgage with the Bank. The mortgage stated the mortgagor was "Steven L. Morrell, A Single Person." The mortgage was secured by Morrell's residential property. The mortgage document was signed by Morrell as the mortgagor. Beneath Morrell's signature, is an acknowledgment signed by Adkins as the notary public stating:

On this 26th day of March, 2008 before me, a Notary Public in the state of Iowa, personally appeared Steven L Morrell, A Single Person, to me known to be the person(s) named in and who executed the foregoing instrument, and acknowledged that ...

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