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Farmers Savings Bank v. Wessels

Court of Appeals of Iowa

October 10, 2018

FARMERS SAVINGS BANK, Plaintiff-Appellee,
v.
RICHARD ALLEN WESSELS, PRIME RUT, INC., and WESSELS LAND, LLC, Defendants-Appellants, and ROBB WESSELS, Defendant.

          Appeal from the Iowa District Court for Clayton County, John J. Bauercamper, Judge.

         Appellants appeal a district court decree granting foreclosure of mortgages on farm property in favor of Farmers Savings Bank.

          Peter C. Riley and Patrick J. Riley of Tom Riley Law Firm, PLC, Cedar Rapids, for appellants.

          D. Flint Drake and Samuel M. Degree of Drake Law Firm, PC, Dubuque, for appellee.

          Considered by Danilson, C.J., and Mullins and McDonald, JJ.

          MULLINS, JUDGE.

         Appellants[1] appeal a district court decree granting foreclosure of mortgages on farm property located in Clayton County, Iowa, in favor of Farmers Savings Bank (FSB).

         I. Background Facts and Proceedings

         Upon our de novo review of the record, we make the following factual findings. In the fall of 2005, Richard Wessels approached FSB's senior vice president, Mike Funke, for refinancing services in relation to debts secured by Wessels's Clayton County farm, on which another lender was preparing to foreclose. On April 21, 2006, Wessels granted FSB a mortgage on the farm to secure a loan in the amount of $371, 000.00. The mortgage defined "secured debt" as, among other things:

All . . . future obligations of Mortgagor to Lender under any promissory note, contract, guaranty, or other evidence of debt existing now or executed after this Mortgage whether or not this Mortgage is specifically referred to in the evidence of debt and whether or not such future advances or obligations are incurred for any purpose that was related or unrelated to the purpose of the Evidence of Debt [and] [a]ll obligations Mortgagor owes to Lender which now exist or may later arise, to the extent not prohibited by law . . . .

         For a few years, Wessels generally made his payments under this loan in a timely fashion.

         In the fall of 2008, Wessels approached Funke about financing to purchase a bar in Linn County. At this point in time, Wessels still owed on the 2006 loan and the farm was still encumbered by the 2006 mortgage. Funke advised Wessels the farm would be the primary collateral for the bar loan while the bar itself would serve as secondary collateral. On January 20, 2009, Wessels, on behalf of Wessels Land, LLC, executed a promissory note in the amount of $300, 448.84. Wessels signed a personal guaranty of payment and granted FSB a second mortgage on the farm to secure the 2009 bar loan. The 2009 mortgage defined "secured debt" in the same manner as the 2006 mortgage. In February 2010, Wessels signed a second promissory note in the amount of $27, 201.00 to obtain a loan to remodel the bar. The note provided the 2010 loan would be secured by the previously granted mortgages on the farm.

         Wessels began to fall behind on his payments in late 2009. Problems with Wessels's ability to meet his obligations on the loans continued through 2012. In June 2012, the FDIC inspected FSB's loan files as to Wessels and recommended that FSB be much more aggressive in collecting from Wessels or foreclose on the mortgages. Shortly thereafter, Funke met with Wessels to discuss the situation and recommended that Wessels sell a portion of the farm and use the proceeds to get current with his loan obligations. At this point, Wessels advised Funke he had deeded the farm to his son, Robb, and directed Funke to contact Robb to get it sorted out.[2] This was the first time FSB had any knowledge the farm had been deeded to Robb. Funke contacted Robb and advised foreclosure was looming if progress on the loans was not made by the end of September. Robb, the title holder of the farm at this time and fearing foreclosure, advised Funke he desired to refinance the original farm debt into his name and bring the bar debt current.

         Prior to offering Robb refinancing services, FSB had a title opinion prepared as to the farm. The title opinion found good and merchantable title to be held by Robb. On September 27, Robb executed a promissory note in the amount of $146, 000.00 and granted FSB a mortgage on the farm to secure the loan. The same day, Robb paid off the original 2006 loan and paid enough on the 2009 and 2010 bar loans to bring them current.[3] ...


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