Opinion ID: 4520102
Heading Depth: 2
Heading Rank: 2

Heading: All Debts. All present and future debts from

Text: Mortgagor to Lender, even if this Security Instrument is not specifically referenced, or if the future debt is unrelated to or of a different type than this debt. Notably, paragraphs 1 and 2 of the mortgage stated that the mortgage secured credit up to a principal amount of $148,000. The mortgage also stated that loans and advances up to that amount were “senior to indebtedness to other creditors under subsequently recorded or filed mortgages and liens.” Paragraph 3, on the other hand, defined “secured debts” to include not only the $148,000 loan but “[a]ll present and future debts from Mortgagor to Lender.” Paragraph 3, however, did not discuss priority vis-à-vis subsequent lienholders. By March 2017, Stecher’s outstanding borrowings from Blue Grass on the various promissory notes totaled approximately $556,965.32, not including interest. Yet on the 2014 note that had been used specifically to buy Stecher Farms, the principal balance was approximately $139,341.51, down from the original $148,000. At that point, Stecher sought financing from another source— Community Bank & Trust Company. On March 18, 2017, Community Bank loaned Stecher $589,502.59, taking a mortgage on the same farm property (i.e., Stecher Farms). A Community Bank loan officer reviewed Blue Grass’s existing mortgage at the time of the transaction. He concluded that Blue Grass’s mortgage only gave Blue Grass lien priority up to $148,000, plus interest. 5 About a year-and-a-half passed. On August 10, 2018, following unsuccessful farm mediation, Blue Grass filed a petition in the Iowa District Court for Muscatine County to foreclose on Stecher Farms. Blue Grass alleged that its mortgage secured its entire $556,965.32 debt, plus interest. Stecher did not contest foreclosure. However, Community Bank, which was named as a defendant because of its junior mortgage, filed an answer alleging that Blue Grass’s mortgage was “capped at a loan amount of $148,000.00.” Blue Grass moved for summary judgment of foreclosure; Community Bank resisted the motion. The district court held a hearing, and on April 8, 2019, the court granted Blue Grass’s summary judgment motion. Relying largely on an unpublished decision of our court of appeals, the district court found that Blue Grass’s priority over Community Bank was not limited to the $148,000 amount set forth in the mortgage. Rather, Blue Grass’s priority extended to all debt secured by the Blue Grass mortgage to the extent the funds had been advanced to Stecher before the recording of the Community Bank mortgage. The district court also ruled that Blue Grass was entitled to charge an 18% rate of interest after default. That same day, the district court entered a decree of foreclosure. The decree was consistent with the court’s summary judgment ruling, although it did not include interest at the default rate because the court decided the interest rate was a moot point. Since the principal amount of the debt being foreclosed on by Blue Grass far exceeded the value of the property, it did not matter what interest rate was allowed. 1 Community Bank appealed, and we retained the appeal. 1At the summary judgment hearing, Blue Grass estimated the value of Stecher Farms to be $200,000. 6