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Iowa: Probate Estate Not Needed to Complete In Rem Foreclosure

Posted By USFN, Tuesday, August 14, 2018
Updated: Wednesday, August 8, 2018

August 14, 2018

by Ryan C. Holtgraves
Petosa Law LLP – USFN Member (Iowa)

The Iowa Court of Appeals recently held that when pursuing an in rem foreclosure against a deceased mortgagor’s real estate, a probate estate need not be opened if known and unknown heirs are served in accordance with Iowa’s Land Title Standards. U.S. Bank v. Parrott, No. 17-0513 (Iowa Ct. App. July 18, 2018).

Background
In Parrot, the mortgagor died and the loan fell into default. U.S. Bank commenced an in rem foreclosure action, and the pre-foreclosure title work indicated that a probate estate had not been opened for the deceased mortgagor. The bank proceeded to name the decedent’s sons, as well as unknown heirs and unknown parties claiming any interest in the decedent’s real estate, as defendants.

U.S. Bank followed longstanding practice and served the unknown parties by publication in accordance with Iowa Rules of Civil Procedure 1.311 and 1.312. No party answered the petition, and U.S. Bank filed an application for default judgment.

Following a recent trend in Iowa’s Seventh Judicial District, the district court denied the motion, ruling that a probate estate must be opened to identify the unknown heirs and interested parties in order for the court to have jurisdiction over the unknown parties.

Appellate Analysis
The Iowa Court of Appeals, after reviewing Title Standards 7.8(1) & (4) and Iowa Code Sections 654A(5) and 654.5(1)(c), determined that the district court abused its discretion in denying default judgment against the unknown parties.

Standard 7.8(1) states that there is no need to open an estate when completing an in rem foreclosure on real estate owned by a deceased mortgagor. Additionally, Standard 7.8(4) states that if no probate estate has been opened, the foreclosure should name all unknown parties with an interest in the estate.

The appellate court, giving deference to the Iowa Land Title Standards, concluded that the district court could exercise jurisdiction over unknown parties served by publication. Further, the Court of Appeals observed that even if a probate estate were opened, the method of service on unknown parties would be the same under Iowa’s Probate Code.

Conclusion
The Parrot decision follows Iowa’s Title Standards and upholds the longstanding practice in this state of naming and serving unknown interested parties (serving them by publication) when foreclosing in rem.

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