On May 11, 2022, the Iowa Court of Appeals issued an opinion in the case of In the Matter of the Estate of Dennis R. Peterson, Deceased, Joseph Parcell, Appellant. The decedent Dennis Peterson executed a Will on August 27, 2018. The Will provided in part “I hereby give to Joe Parcell lifetime use of the 2nd and 3rd bays at 207 Collins Street… so long as he pays 35% of overhead”. The Will went on to give the residue of the estate to the decedent’s daughter, Donna Sue Peterson. The Will Appointed Donna Sue Peterson as the executor. Dennis passed away on February 25, 2020.
In the probate matter the Iowa Department of Human Services (DHS) filed a claim for $138,086.27. During the course of administration, the executor petitioned for the authority to sell the real property and requested that the court determine that the life estate was adeemed because of bills existing and the value of the estate. The district court denied the petition concluding that the doctrine of the ademption was inapplicable. The executor filed a second petition to sell real property which provided that the property must be sold for purpose of paying debts, citing Iowa Code Sections 633.425 and 633.436. The district court found that “There is no dispute the debts and charges of the estate exceed its assets”. The court went on to say, “because the debts and charges of the estate exceed the assets, the specific devise of the life estate in two bays of a storage building to Joe Parcell abates for payment of the estate’s debts and charges”.
Parcell claimed that abatement was not necessary because the estate was not insolvent. He also claimed that the district court did not follow the order of abatement in Iowa Code Section 633.436. The estate and DHS argued that the executor had the authority to sell real estate under Iowa Code Section 633.264 and that the matter of abatement was not ripe. In regard to Parcell’s claim, that the estate was not insolvent and such abatement was unnecessary the Court of Appeals found that abatement is not limited to matters involving an insufficient estate. The Court of Appeals went on to find that abatement is required to pay all the debts and charges of the estate and agreed with the district court ruling that abatement was necessary.
The Court of Appeals moved on to discuss the order of abatement. In regard to Iowa Code Section 633.264 which authorizes an executor to sell real estate, the Court of Appeals found that the section merely authorizes the executor to dispose of estate property. Furthermore, the court stated, “It does not, however, provide blanket powers to dispose of property in any way the executor sees fit”. The Court of Appeals found that “Section 633.264 authorizes the executor to dispose of the property and, if necessary to pay debts against the estate following the abatement procedure set out in Section 633.436.”
The Court of Appeals went on to find that the district court did not follow the order of abatement and Iowa Code Section 633.436. It ruled that the bequest to Parcell was a specific devise, and that Donna received the residue of the estate. The Court of Appeals went on to find that the bequest to Donna must abate prior to the bequest to Parnell. The Court of Appeals went on to reject the claim of DHS and the estate that the property was not subject to an abatement due to the fact that the executor was organizing assets in the estate and was not actively paying off debts that would typically trigger abatement.
The Court of Appeals found that the abatement issue was ripe. The Court of Appeals found that the second petition of the estate included documentation of an offer to purchase the property “subject to the full removal of Joe Parcell and his encumbrances”. The court noted that the approval of the estate petition would extinguish Parcell’s life estate interests.
In closing the court found that abatement was necessary to pay the debts and charges of the estate and that the district court did not follow the order of abatement in Iowa Code Section 633.436. The court found that the order of abatement should be the residuary bequest to Donna Peterson first and the specific bequest to Parcell second.