Opinion ID: 1844267
Heading Depth: 1
Heading Rank: 4

Heading: Unjustifiable Impairment of Collateral.

Text: In their cross-appeal, the Woods challenge the district court's finding that their defense of unjustifiable impairment of collateral was not available. In short, the Woods claim FLB unjustifiably impaired the collateralthe farmby not making sure that the Woods had a fee simple estate before loaning the money and taking the note and mortgage. As we noted earlier, the Woods used this same argument to support their partial failure of consideration defense. The Woods rely on Iowa Code sections 554.3601(1)(d) and 554.3606(1)(b). Those sections provide: Section 554.3601. Discharge of parties. 1. The extent of the discharge of any party from liability on an instrument is governed by the sections on . . . . d. impairment of right of recourse or of collateral (section 554.3606). Section 554.3606. Impairment of recourse or of collateral. 1. The holder discharges any party to the instrument to the extent that without such party's consent the holder . . . . b. unjustifiably impairs any collateral for the instrument given by or on behalf of the party or any person against whom he has a right of recourse. The short answer to the Woods' claim is that FLB did not impair the collateral. The collateral was impaired before FLB took its mortgage. The impairmentdefect in titledid not arise because of anything FLB did or failed to do. In addition, the note itself is a consent for the release of any party and any part of the collateral. On this point the note provides: Each of the persons signing this note hereby binds his or her separate estate, existing at the date of this note or hereafter acquired, for the payment of this note, and agrees that any release of the security, or of any person liable hereon shall not operate as a release of any other signer, endorser, surety, or guarantor of this note. (Emphasis added.) Finally, according to the Woods' own pleadings, this defense is predicated on FLB's duty to make sure the Woods would own the farm in fee simple. There was no such duty under the evidence in this record. The Woodsnot FLBhad a duty to make sure they would have full ownership of the farm before they executed the note and mortgage. The Woods expressly warranted in the mortgage that they were the fee owners of the farm. For all these reasons, we find no merit in the Woods' challenge to the district court finding on this issue.