Raub v. General Income Sponsors Of Iowa, Inc.

176 N.W.2d 216 (1970)

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Nature of the Case

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Facts

P knew what a warranty deed was and understood the legal effect of such an instrument. P owned her own home, upon which there was then a small mortgage. P sought the advice of Clark Barczewski and Joseph Huffman, officers and agents of General (D) for selling some stock she owned and for setting up a retirement. They convinced P to invest in General (D). By a series of transactions, P gave Barczewski $10,000.00 for stock in that corporation. P executed and delivered to General (D) a warranty deed to her homestead, which by then had been cleared of its existing mortgage, in return for which she was to receive an additional $14,000.00 in company stock. P asked for the stock certificate several times but never received it. The warranty deed was recorded December 20, 1965. P remained in possession of the real estate as a tenant, paying $70.00 a month rent from December 1965, through August 1966. The rent was paid to Mr. Barczewski on General's (D) behalf. First National Bank of Fort Dodge, took a mortgage on this property from General (D) in the amount of $6000.00. The mortgage was promptly recorded. The Manson State Bank placed a second mortgage on the real estate to secure payment of $10,350.00. This mortgage was recorded on November 7, 1966. P did not suspect she was being swindled until early in 1967 when an officer of the First National Bank called to tell her future rent payments should be made there. Without a doubt, P's warranty deed of December 2, 1965, was obtained by fraud. It was properly set aside by the trial court. Ds appealed. First and Manson assert they are nevertheless entitled to enforce the liens of their mortgages because they qualify as bona fide purchasers. P claims that her continued occupancy of the property after its transfer to General (D) put First and Manson on notice to make inquiry about P’s rights to the property and the circumstances of General's (D) acquisition of the property.