Opinion ID: 1280875
Heading Depth: 2
Heading Rank: 3

Heading: Real Estate Payments and Transactions

Text: In the late 1970s, the Richardsons purchased a home located on a forty acre parcel of land outside of Charles City, Iowa. When they filed their bankruptcy petition, this residence was their homestead, and was titled in both their names. After they filed for bankruptcy in 1987, the owner of the mortgage on this property foreclosed on it, and the Richardsons retained no equity. In December of 1987, the Richardsons purchased a home located at 401 North Jackson in Charles City. They purchased this home for $75,000 and borrowed $60,000 from First Security Bank which took a mortgage on the property as collateral. This home remained the Richardsons' principal residence until they sold it in October of 1989. When they sold it, the Richardsons had equity of $23,827. In October of 1989, the Richardsons used the equity of $23,827 to pay a portion of a $36,000 down payment they made on their next home, located at 205 Blunt Street in Charles City. The remaining portion of the cash down payment came from Gary's earnings, and the Richardsons borrowed $144,000 from First Security Bank to pay the remainder of the purchase price of $180,000. The Richardsons titled the 205 Blunt Street home solely in the name of Phyllis. In January of 1990, Gary used his 1989 year-end bonus from a professional corporation in which he was a shareholder, Associates in Surgery, P.C., to pay $50,000 on the $144,000 mortgage loan. This payment reduced the loan balance to $93,737.80 and reduced the monthly payment from $1,467 to $953. In August of 1990, in order to complete the process of eliminating the remaining mortgage balance, Gary unilaterally granted First Security Bank a security interest in his 1990 year-end bonus and filed a financing statement with the Secretary of State. First Security Bank had not requested any additional collateral or further reduction of the principal amount of the mortgage. When the security agreement and financing statement were brought to the attention of the president of First Security Bank during a routine review of recently filed financing statements, the president sent a letter to the Richardsons indicating he was puzzled by Gary's unilateral action. Gary's attorney, Arthur Owens, responded by sending a letter to the bank president in which he mentioned the recent non-dischargeable judgment rendered against Gary and stated Gary wished to improve the position of the bank as his mortgage lender. In addition to entering into a new security agreement with the bank, Gary also entered into a security agreement with the law firm which represented him, Dickinson, Throckmorton, Parker, Mannheimer & Raife, in the event the payoff of the mortgage loan did not completely exhaust his year-end bonus. At the end of 1990, Gary received a substantial bonus which allowed him to make a $94,000 payment to completely pay off the mortgage on the 205 Blunt Street home. The payoff was made directly to the bank from Associates in Surgery. After the payoff, Phyllis owned the house free and clear of any liens. In July of 1992, the Richardsons moved to Newton, Iowa, and Phyllis purchased another home in her name at 1004 South Fifth Avenue West in Newton. At the present time, the Newton house constitutes the Richardsons' homestead. To purchase this home at a price of $167,253, the Richardsons borrowed $100,000 and made a down payment of $7000, leaving approximately $60,000 due at closing. On January 22, 1992, the Richardson's corporation, Richardson, P.C., distributed $650 in dividends to Gary and $64,350 in dividends to Phyllis. Phyllis used this money to pay the remaining cash due on the mortgage. In total, during the time period from January 8, 1990 through the purchase of the Newton property, Phyllis acquired real estate equity of approximately $211,000, all originating from Gary's income.