Opinion ID: 2006984
Heading Depth: 1
Heading Rank: 1

Heading: Appeal of Woods and FLB.

Text: A. Defendants Woods and FLB contend that the Mosers ought not be allowed to receive payment from the Fund to satisfy their judgment against the Schmitts, because the Schmitts and their mortgagees (Thorp Sales Corporation, Thorp Credit, Inc., Thorp Finance Corp. of Wisconsin and ITT Thorp Corp.) had conveyed their interest in the farm to Woods before the Fund was created. Woods and FLB argue that they thereby acquired legal title to the real estate and were entitled to the proceeds of Schmitts' sale to Mosers, proceeds which are now represented by the Fund. Defendants' contention might have merit if the Mosers' judgment against Schmitts was unrelated to their purchase of the farm. That judgment, however, was for rent for the property for the years 1972 to 1974 when Schmitts were in possession of the farm. Moser II, 312 N.W.2d at 901. The Fund does represent Mosers payment of the purchase price to Schmitts, but Mosers have received less than complete ownership and use of the farm since their effective date of January 15, 1972. Moser II, 312 N.W.2d at 900. The trial court correctly found that Mosers are equitably entitled to receive back, as a priority offset against the purchase-money Fund, the rentals for 1972 to 1974 which are now represented by their judgment against Schmitts. In an action for specific performance, the vendee may compel the vendor to convey his defective title or deficient estate and have a just abatement out of the purchase price for the deficiency of title, quantity or quality of the estate to compensate for the vendor's failure to perform the contract in full. Shell Oil Co. v. Kelinson, 158 N.W.2d 724, 730 (Iowa 1968). B. Woods also raise a question of standing, contending that Schmitts make no claim to the Fund and have no standing, so Mosers ought not obtain funds in their place. Mosers, however, have no standing problem. The trial court correctly allowed Mosers to receive from the Fund the Schmitts' rentals which, in effect, abate by that amount what Mosers were required to pay to Schmitts as vendors for the lesser quality of estate which Schmitts actually conveyed. C. Defendant FLB also contends that it is entitled to priority as a purchase money mortgagee because funds provided by it were directly used by Woods to purchase Schmitts' interest in the farm. The FLB argues that the lien of its 1975 mortgage attaches to the Fund (which replaced the farm as the bank's security interest) and takes priority over the later judgments obtained by Mosers against Schmitts and Woods. The trial court properly denied the FLB claim to priority. The record supports the court's finding that the Land Bank participated fully and understandingly with the Defendants Woods in their actions; conduct which deprived Woods of bona fide purchaser status has the same effect on the status of FLB as mortgagee. Moser II, 312 N.W.2d at 894. FLB contends that a resulting or constructive trust for its benefit should be imposed on the Fund, but it has failed to establish by the requisite clear and convincing evidence the facts out of which such a trust would arise. See James v. James, 252 Iowa 326, 330, 105 N.W.2d 498, 500 (1960); Gregory v. Gregory, 248 Iowa 672, 674, 82 N.W.2d 144, 146 (1957); Westcott v. Westcott, 259 N.W.2d 545, 546-47 (Iowa App.1977). Moreover, the trial court correctly found that FLB had neither sought nor obtained any judgment against the parties entitled to the Fund. The Land Bank has demonstrated neither an equitable nor legal basis for its claim to part of the Fund.