Opinion
No. 5-883 / 05-0895
Filed March 15, 2006
Appeal from the Iowa District Court for Kossuth County, Don E. Courtney, Judge.
Cindy Erpelding, Kris Buchanan, Steven Riebhoff, and Kelly Grein appeal the district court's rulingproviding for the general order of abatement pursuant to Iowa Code section 633.436 (2003). AFFIRMED.
Steven Hendricks of Kersten, Brownlee Hendricks, L.L.P., Fort Dodge, for appellants.
Eldon Winkel, Algona, for appellee.
Considered by Huitink, P.J., and Mahan and Hecht, JJ.
Cindy Erpelding, Kris Buchanan, Steven Riebhoff, and Kelly Grein appeal the district court's ruling providing for the general order of abatement pursuant to Iowa Code section 633.436.
I. Background Facts Proceedings.
Donald F. Riebhoff, the decedent, died testate. His wife, Clara Riebhoff, is the executor of his estate. At the time of his death Donald owned undivided interests in certain real estate. He was a farmer, and his estate consisted primarily of agriculture assets, including machinery and equipment, approximately seven thousand bushels of corn, and nineteen thousand bushels of beans. Donald and Clara owed operating debt and mortgage debt to Security State Bank in Algona, Iowa. Donald and Clara were jointly and severally liable on the notes. The operating note has been paid in full, and there is an $80,000 note, secured by real estate, crops, livestock, farm machinery, and equipment, which remains unpaid. It has a balance due of $77,087.72 with accrued interest at the rate of 7.75% from January 17, 2003. Beginning January 15, 2003, payments were to be made with a balloon payment of $71,728.86 on January 15, 2007. The payments that began at the inception of the note on January 11, 2002 and were to be made until the date of the balloon payment were to mainly consist of the interest expense.
As security, Donald and Clara pledged all inventory, equipment, farm products, accounts, and general intangibles as collateral. Essentially, this collateral included all personal property disclosed by the probate inventory and also included is Riebhoff's undivided 7/8th interest in the West 1/2 of the West 1/2 of the Southwest 1/4 of Section 21, Township 96 North, Range 29, West of the Fifth p.m., Kossuth County, Iowa, and Riebhoff's undivided 1/4th interest in the East 1/2 of the West 1/2 of the Southwest 1/4 as collateral for the $80,000 note.
Riebhoff's will left his farm estate, including his interest in the West 1/2 of the Southwest 1/4 of Section 21, to his children subject to Clara's life estate. Clara and the appellants, who include the heirs at law, Steven Riebhoff, Cindy Erpelding, Kris Buchanan, and Kelly Grein, do not agree in their interpretation of the will.
The trial court summarized the arguments of the parties in its March 3, 2005 ruling as follows:
The [heirs at law] take the position that all personal property passing to the wife that was security for personal property loan and real estate debt is to be used to not only pay debts and expenses of the estate but to also pay the separate mortgage debt. They argue principles of indemnity, suretyship and marshaling to justify their position. They argue that Iowa Code section 633.437(2) is applicable and that they have proven by clear and convincing evidence that the provisions of the will, the testamentary plan, or the express or implied purpose of the devise would be defeated by the order of abatement, stated in Iowa Code section 633.436.
[Clara] takes the position that pursuant to Iowa Code section 633.278 [heirs at law] take the remainder interest to the property subject to the mortgage because there is no provision in the will, either expressly or by necessary implication, that the mortgage would be otherwise paid. The mortgage indebtedness cannot be paid from personal property of the decedent because that property is specifically devised to the surviving spouse, and property specifically devised to the surviving spouse by virtue of Iowa Code section 633.436 is the last place that property is taken to pay debts including mortgage payments. Therefore, the only place that debts and expenses can come from in this estate is from the residuary beneficiaries and the remainder interest in the farm real estate.
The trial court concluded that Riebhoff's will provided that just debts and expenses are to be first paid out of the estate and that there was no specific reference in the will as to how debts and expenses were to be paid. The trial court reasoned that requiring Clara to pay the mortgage indebtedness would leave her with nothing and there would still be an amount due on the mortgage. Additionally, to require her to pay this debt would be contrary to Iowa Code sections 633.278, 633.436, and 633.437. The fact that the will devised Clara a life estate in real estate shows Riebhoff intended first to provide for his wife after his death. The trial court further concluded that the abatement provisions of the Iowa Code in sections 633.436, 633.437, and 633.278 take precedence over principles of indemnity, suretyship, and marshaling by specifically codifying where the debts and expenses are to come from in an estate and out of whose share they shall be paid. In summation, the trial court surmised that the heirs at law failed to present clear and convincing evidence that the court should follow a different order of abatement of debts and expenses than that required by Iowa Code section 633.436.
The appellants raise the following issues on appeal:
Clara Riebhoff, as an obligor on a promissory note with a principal balance due of approximately $77,000.00 plus accrued interest is obliged to pay the debt before resorting to assets devised to the decedent's heirs at law. Further, where there are other assets available to pay the bank debt which were also collateral for payment of the bank debt, those assets must be resorted to before liquidating an asset specifically devised to the decedent's heirs at law.
II. Standard of Review.
Our review is de novo. In re Estate of Noe, 195 N.W.2d 361, 363 (Iowa 1972).
III. Merits.
The heirs at law argue that the concepts of indemnity, suretyship, and marshaling require that the mortgage indebtedness be paid out of Riebhoff's personal property. Clara maintains the court correctly applied Iowa Code section 633.436 and should be affirmed.
Iowa Code section 633.436 governs abatement in Iowa and delineates the order in which bequests stand aside in deference to estate claims. Folkerds v. U.S., 494 F.2d 749, 752 (8th Cir. 1974). Iowa Code section 633.436 dictates as follows:
[S]hares of the distributees shall abate, for the payment of debts and charges, federal and state estate taxes, legacies, the shares of children born or adopted after making the will, or the share of the surviving spouse who elects to take against the will, without any preference or priority as between real and personal property, in the following order:
1. Property not disposed of by will;
2. Property devised to the residuary devisee, except property devised to a surviving spouse who takes under the will;
3. Property disposed of by the will, but not specifically devised and not devised to the residuary devisee, except property devised to a surviving spouse who takes under the will;
4. Property specifically devised, except property devised to a surviving spouse who takes under the will;
5. Property devised to a surviving spouse who takes under the will.
The purpose of this statute is:
The section evidences a clear intent on the part of the legislature to protect the interest of the surviving spouse. Each section dealing with property that passes under the will specifically protects the property passing to the spouse down to the very last source. Then, and then only, does the legislature make the spouse's share subject to debts and charges.
Folkerds, 494 F.2d at 752 (citing In re Estate of Twedt, 173 N.W.2d 545, 547 (Iowa 1970)). The intent of the testator can be "gathered from a consideration of (a) all the language contained in the four corners of the his will, (b) his scheme of distribution, (c) the circumstances surrounding him at the time he made his will, [and] (d) the existing facts." Estate of Twedt, 173 N.W.2d at 549.
Riebhoff's will states "that all my just debts, including expenses of last illness and burial, and costs of administering this, My Last Will and Testament, be first paid out of my estate." This statement is a general direction given to the personal representative that "would not be sufficient to overturn the operation of the statute." Sheldon F. Kurtz, Kurtz on Iowa Estates § 15.30, 624 (1995). The language in the will is not explicit enough to implicate Iowa Code section 633.437(1) which provides for the order of abatement contrary to section 633.436 when the will explicitly provides for an order of abatement. Consequently, because of the general language in Donald's will, we believe 633.436 is controlling.
The heirs at law contend that a contrary result is required under theories of indemnity, suretyship, and marshaling. However, other than invoking these concepts, the brief filed by the heirs at law contains no argument or analysis applying any of those theories to the facts of this case. By failing to do so, the heirs at law have waived these issues, and we decline to consider them on appeal. See Iowa R. App. P. 6.14(1)( c).