Marshall County Confidential

Spahn and Rose Lumber Co. v. Jones, no. 07-1742 (Iowa Ct. App. Mar. 11, 2009)

Jones owned real estate in Marshall County and was building a house on it. There were three liens: the plaintiff's mechanic's lien, a mortgage lien held by Aegis, and a lien held by Angell Landscaping.

Spahn and rose filed suit to foreclose their lien and the court ordered the property sold, the sheriff erroneously noting that the property was not subject to redemption

A sale was held that was not attended by Aegis, believing there was a statutory redemption period in place.

Moyer bought the property for $190,000 and executed a mortgage to Grundy National Bank.

A hearing was held to disburse the surplus after Spahn and Rose had been paid and Aegis filed a claim for $408,710.68. The surplus, $111,000 was turned over to Aegis, leaving Angell out in the cold.

The fighting issue, as it developed, was whether Moyer could be considered a good faith purchaser for value, which would have had the effect of stripping Aegis of its statutory right of redemption because of the provisions of Iowa R. Civ. P. 1.1015(1).

Aegis argued that Moyer could not be a good faith purchaser for value because she had constructive notice of Aegis' statutory right of redemption.

The Court of Appeals agreed, noting a long line of cases that suggest that a purchaser at a foreclosure sale is charged with notice of such material facts as the record discloses. It also noted that the trial court's finding that Moyer was a good faith purchaser for value conflicted with previous decisions that the representations made by the sheriff at a foreclosure sale contain no guarantee of the legal status of a title.

Moyer was charged with constructive notice of title through properly recorded public documents. Moyer had not, as it happened, pursued a title search or sought legal advice.

The takehome's simple-look before you leap.