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In re Estate of Waterman

Supreme Court of Iowa

June 6, 2014


Appeal from the Iowa District Court for Clayton County, Richard D. Stochl, Judge. A surviving spouse appeals a district court ruling on her claim for recognition of her homestead interest in property sold by administrators of decedent's estate.

John W. Hofmeyer III, Oelwein, for appellant.

Alan T. Heavens of McClean, Heavens, & Vorwald Law Offices, Elkader, for intervenor-appellees.

Mary Jane White, Waukon, for former estate administrators-appellees.


Page 561

HECHT, Justice.

The administrators of an estate listed residential real estate for sale. The decedent's common law spouse objected to the proposed sale of the property, contending the property was her home. The district court nonetheless authorized the sale of the property and the transaction was closed. The buyers took possession and made substantial improvements during the pendency of an appeal from the district court's order authorizing the sale. The court of appeals reversed the district court's order and remanded to the district

Page 562

court for consideration of the homestead interest of the surviving spouse.

The district court concluded on remand that the surviving spouse should, at her election, receive either the proceeds from the estate's sale of the real estate or the real estate itself upon payment to the buyers of a substantial part of the cost of the improvements made by them. In this second appeal, we must resolve the clash between the surviving spouse's homestead interest under Iowa Code chapter 561 and the interests of the buyers who claim the status of occupying claimants under Iowa Code chapter 560. We also address the surviving spouse's claim for loss of the rental value of the homestead for the period during which she was deprived of possession.

I. Background Facts and Proceedings.

Jingles Waterman (formerly known as Debra Voss) began living with Glen Waterman in a house Glen owned in Mederville, Iowa, in March 2000. Glen passed away on May 10, 2008, leaving no will. Although Glen and Jingles had been longtime companions and had lived together for eight years, they had never married.

On May 20, the district court appointed Glen's parents, Verdeen and Loretta Waterman, as administrators of his estate.[1] On May 29, the administrators served Jingles with a notice to quit, which required her to vacate within thirty days the home she and Glen had shared for the previous eight years. Jingles complied with the notice, moving out in June, and the administrators moved into the home shortly thereafter.[2]

Jingles filed a claim in probate on October 10, seeking reimbursement for her " joint survivor ownership interest in assets of the estate" and a lien " for improvements made to the estate" while she and Glen had cohabited. She also filed a document stating she was Glen's surviving spouse and noting she would elect to take " her intestate share" of Glen's property. On November 6, the administrators filed notices disallowing these reimbursement and spousal election claims.

After hearings on Jingles's disputed claims, the district court determined in August 2009 that Jingles was Glen's common law spouse [3] at the time of his death and her property interests were therefore protected under Iowa Code section 633.211.[4] Under that provision, Jingles was entitled as Glen's surviving spouse to

Page 563

" [a]ll the value of all the legal or equitable estates in real property possessed by the decedent at any time during the marriage," that had " not been sold on execution or by other judicial sale," and to which she had " made no relinquishment of right." See Iowa Code § 633.211(1) (2007). In addition, Iowa Code section 561.11 granted Jingles, as Glen's surviving spouse, certain homestead rights, which allowed her to " continue to possess and occupy" the marital home until it was " otherwise disposed of according to law." Id. § 561.11.

Soon after the district court recognized her as Glen's common law spouse in August, Jingles expressed a desire to return to the marital home. By March 2010, however, the parties had failed to reach a resolution of Jingles's possessory interest in the homestead, and Jingles continued to live elsewhere. Frustrated with the estate's inattention to her claims, Jingles wrote a letter to the district court reporting no progress had been made in the months since the court's August 2009 ruling and informing the court the administrators had listed the home for sale in November 2009.

In early 2010, Daniel and Chasity Bushaw learned the administrators had listed the home for sale and became interested in purchasing it, despite their concerns about its condition and the possibility that Glen's former wife, Nancy, retained a property interest in the home. The Bushaws made an offer to purchase the home for the administrators' listed price of $20,000. The administrators filed a petition with the district court in April 2010 seeking approval of the proposed sale.[5] The court held a hearing on the petition on May 4. Jingles attended the hearing without counsel. The administrators contended the real estate should be sold to pay funeral bills, real estate taxes, and utility bills totaling in excess of $14,000. Jingles objected to the sale, asserting the utility bills would not have been incurred by the administrators had they not evicted her from the residence. The administrators presented evidence tending to prove the fair market value of the home was $20,000.

Based on the evidence presented at the hearing on the administrators' petition, the district court approved the sale of the residence to the Bushaws. The Bushaws received a deed to the property on May 21 and took possession.

Jingles appealed the district court's order on June 4, contending the court erred in failing to recognize her homestead interest and in failing to prevent the administrators from engaging in self-dealing in their handling of the estate.[6] Soon after taking possession, the Bushaws began making extensive improvements to the roof, septic system, plumbing, wiring, and other aspects of the property, at a cost of over $65,000. An appraisal of the residential property--accounting for the Bushaws' improvements--assigned to the property a fair market value of only $41,000.

On June 15, Jingles filed an application requesting the administrators be required to post a bond in the amount of $100,000. The motion asserted Jingles had not waived the bond requirement as the estate's beneficiary and requested a court

Page 564

order requiring the bond as a condition of the administrators' continued service as administrators. A week later, Jingles filed a petition seeking removal of the administrators, asserting they were unsuitable under Iowa Code section 633.63(1)( b ) because of their hostility toward her as the estate's sole beneficiary.

The district court entered an order on July 14, continuing the hearing on the application to remove administrators. The court noted that although the administrators had not objected to their removal, neither party had been able to identify a proposed successor. A successor was soon identified, however, and on July 29 an order approved by counsel for the administrators and counsel for Jingles was entered removing the administrators, ordering them to file a final report.

The administrators filed their final report on August 13, listing Jingles as the sole heir and beneficiary of the estate, and also listing the homestead as an asset sold during the administration. Jingles filed an objection to the final report, contending the sale of the home was in contravention of her homestead rights.

On March 7, 2011, the court of appeals reversed the district court order authorizing the sale of the home and remanded the case to the district court for consideration of Jingles's homestead interest in determining a proper disposition of the property. The former administrators filed an amended final report on March 21. Jingles again objected and requested payment of fair rental value for the time the administrators had wrongfully withheld possession.

The Bushaws' real estate agent, Owen Sylvester, notified the Bushaws of this development and informed them it might affect their ownership interest in the home. Upon receiving this notice, the Bushaws stopped making improvements to the home. In April 2011, after Jingles served them with a notice to quit, the Bushaws filed an appearance in the estate and moved for a declaration they were the rightful possessors and owners of the property.[7] Jingles filed a " Statement of Position" on May 4, asserting her entitlement to " immediate possession of her homestead, and to reasonable rent for the time that she was wrongfully dispossessed."

Cross-motions for summary judgment were thereafter filed by Jingles and the Bushaws, each asserting entitlement to ownership and possession of the property. The motions were denied, however, and the district court held a hearing in April 2012 on the parties' competing interests in the real estate.[8] The Bushaws contended they were bona fide purchasers with no notice of Jingles's adverse interest, they had made improvements to the homestead property in good faith, and they were therefore occupying claimants under Iowa Code section 560.1. Jingles responded, asserting her homestead rights were superior to any interests of the Bushaws, the Bushaws were not occupying claimants under Iowa Code chapter 560 because they had not purchased the property from a true " judicial sale as required under Iowa Code section 560.2(1)," the Bushaws had not acted in good faith when purchasing the home and making their improvements, and she was entitled to rent for the period

Page 565

during which she had been wrongfully dispossessed of the property.

After an evidentiary hearing on the merits, the district court determined neither the Bushaws nor Jingles had " acted in bad faith" and " [n]either deserve[d] to suffer the inequity" of being ousted from the home or being saddled with the costs exceeding the appraised value of the home incurred by the Bushaws in making their improvements. The court therefore gave Jingles the option of taking possession of the home upon paying the Bushaws $53,500 [9] as compensation for their improvements, or receiving $20,000--the purchase price of the unimproved home--from the estate in exchange for relinquishing to the Bushaws her ownership interest in the property. The court's order found the property had no rental value and therefore denied Jingles's damage claim for lost rent during the period she was wrongfully denied possession. Jingles appealed again and we retained the appeal.

II. Scope of Review.

We review probate matters tried in equity de novo. In re Estate of Whalen, 827 N.W.2d 184, 187 (Iowa 2013); see also Iowa R. App. P. 6.907. Although actions under Iowa Code chapter 560 " must be tried as in ordinary actions," see Iowa Code § 560.3, the district court and the parties expressly stated in the record their belief the trial of this matter was in equity. Thus our review of the facts in this case is de novo, in conformity with the manner in which the case was tried below. See Molo Oil Co. v. City Of Dubuque, 692 N.W.2d 686, 690 (Iowa 2005). Our review of the district court's interpretation of ...

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