In re Estate of Rice

IN THE COURT OF APPEALS OF IOWA
No. 21-1868
Filed December 7, 2022
IN THE MATTER OF THE ESTATE OF SUSAN I. RICE, Deceased,
METHODIST MANOR RETIREMENT COMMUNITY,
Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Buena Vista County, Shayne Mayer,
Judge.
A nursing home appeals the grant of summary judgment denying priority for
its claim in probate. AFFIRMED.
John M. Murray of Murray & Murray, P.L.C., Storm Lake, for appellant.
Thomas J. Miller, Attorney General, and Laura F. Kron, Assistant Attorney
General, for appellee.
Considered by Ahlers, P.J., and Badding and Chicchelly, JJ.
2
BADDING, Judge.
Methodist Manor Retirement Community, where Susan Rice spent the last
years of her life, appeals from the district court’s denial of its attempt to jump in line
ahead of the Iowa Department of Health and Human Services1 as a creditor in her
estate. We affirm.
Susan Rice bought a home in 1990. Years later, she became a resident of
Methodist Manor. She continued to maintain her home, which she claimed as her
homestead until her death in October 2020. During Rice’s time at Methodist
Manor, the department paid the nursing facility Medicaid benefits for her care. For
some of those years, Methodist Manor failed to collect Rice’s share for its services.
The facility accordingly obtained a judgment against her in 2015 for $32,759.80.
Rice’s will was admitted to probate shortly after her death. She did not leave
a surviving spouse or children. The department soon filed a claim in probate
seeking to recover $395,612.12 in Medicaid payments made on Rice’s behalf. The
executor later filed a report and inventory showing the gross value of probate
assets was $51,016.20, with $45,000.00 of the value attributed to Rice’s home. In
March 2021, Methodist Manor filed a claim in probate seeking to recover its 2015
judgment against Rice. Methodist Manor and the department both filed motions
for summary judgment, with each arguing their claim had priority over the other.
After a hearing, the district court granted the department’s motion for summary
1 Beginning July 1, 2022, the Iowa Department of Human Services began
transitioning into the Iowa Department of Health and Human Services. See 2022
Iowa Acts ch. 1131, § 51.
3
judgment and denied Methodist Manor’s, finding the department’s claim has higher
priority.
We review Methodist Manor’s appeal from the district court’s ruling on
summary judgment for the correction of errors at law. In re Est. of Renwanz, 561
N.W.2d 43, 44 (Iowa 1997). “We will uphold a summary judgment order when the
movant shows there are no genuine issues of material fact and it is entitled to
judgment as a matter of law.” Id. Methodist Manor concedes there are no material
facts at issue, making the matter before us solely a question of law. See Plowman
v. Fort Madison Cmty. Hosp., 896 N.W.2d 393, 398 (Iowa 2017) (“Summary
judgment is appropriate if the only conflict concerns the legal consequences of
undisputed facts.” (citation omitted)).
Iowa Code section 633.425 (2020) controls the priority of probate claims.
See In re Est. of Lau, 442 N.W.2d 109, 111 (Iowa 1989). Methodist Manor
acknowledges that its claim, if unsecured, is a lower priority than the department’s
Medicaid-reimbursement claim. See Iowa Code § 633.425(7), (10). But the facility
argues it has a secured lien, which is not subject to the preference provisions of
section 633.425. See id. § 633.423 (providing a procedure for secured claims in
probate); Lau, 442 N.W.2d at 111–12 (“[C]laimant’s [secured] liens have priority
over the debts and charges listed in section 633.425.”). To get to that conclusion,
Methodist Manor relies on Iowa Code sections 624.23 and 561.21.
Starting with those statutes, we observe that judgments like the one
Methodist Manor obtained against Rice in 2015 typically create “liens upon the real
estate owned by the defendant.” Iowa Code § 624.23(1). That is not the case,
4
however, for land used and occupied as a homestead, against which judgment
liens generally do not attach. Id. § 624.23(2)(a).
Recognizing the protections afforded to homesteads, Methodist Manor
makes a two-pronged argument for why it nevertheless has a judgment lien
secured by Rice’s home that is entitled to payment ahead of the department’s
Medicaid-reimbursement claim. For the first prong, Methodist Manor relies on
Iowa Code section 561.21(4) in arguing the homestead exemption does not apply
to Rice’s home after her death. Section 561.21(4) states, “The homestead may be
sold to satisfy debts . . . [i]f there is no survivor or issue, for the payment of any
debts to which it might at that time be subjected if it had never been held as a
homestead.” Since Rice left “no survivor or issue,” the facility argues that
section 561.21(4) lifted the homestead protection from her home upon her death.
From that premise, Methodist Manor contends in the second prong of its argument
that its judgment lien attached to Rice’s home after her death without the protection
of the homestead exemption. See Id. § 554.9203(1) (“A security interest attaches
to collateral when it becomes enforceable against the debtor with respect to the
collateral . . . .”).
We need not decide the first prong because, even if Methodist Manor’s
judgment lien could attach to Rice’s home, attachment cannot occur before Rice’s
death. See Brown v. Vonnahme, 343 N.W.2d 445, 446 (Iowa 1984) (“[A] judgment
lien does not attach to property used and occupied as a homestead.”). And it is
that point in time we are concerned with when examining the priority of these
dueling claims. To understand why, we look to Iowa Code section 249A.53, which
controls the department’s Medicaid-reimbursement claim. See In re Est. of
5
Laughead, 696 N.W.2d 312, 317 (Iowa 2005) (stating current section 249A.53, and
not the probate code, “control[s] the determination of assets includable in a
recipient’s estate for purposes of satisfying a Medicaid debt”).
The Medicaid benefits the department provided to Rice while she was at
Methodist Manor “create[d] a debt due the department from the individual’s estate
for all medical assistance provided on the individual’s behalf, upon the individual’s
death.” Iowa Code § 249A.53(2) (emphasis added). When identifying a Medicaid
recipient’s estate for reimbursement, the estate “includes any real property . . . in
which the recipient . . . had any legal title or interest at the time of the recipient’s . . .
death.” Id. § 249A.53(2)(c) (emphasis added). This definition of “estate” does not
exclude realty protected by the homestead exemption, which tracks the
legislature’s intent to “broadly” define the estate under section 249A.53. In re
Barkema Tr., 690 N.W.2d 50, 55 (Iowa 2004). Importantly, the estate is measured
at “the time immediately before the Medicaid recipient’s death” for purposes of
section 249A.53, and not “at the precise moment” the recipient dies or some later
point, as Method Manor seems to argue. Id. at 56.
Putting the various code sections and case law together, the department
may recover Medicaid payments from Rice’s estate as her estate existed
immediately before her death, including her home with the homestead exemption
still in effect. See Iowa Code § 249A.53(2)(c). Assuming Methodist Manor’s
judgment lien could attach to Rice’s home, that would not happen until after her
death and after identification of her estate for Medicaid-reimbursement purposes.
See Brown, 343 N.W.2d at 446. Therefore, Rice’s home was not encumbered by
any judgment lien for purposes of the department’s Medicaid-reimbursement
6
claim. We affirm the district court’s grant of summary judgment finding the
department’s Medicaid-reimbursement claim was entitled to payment before
Methodist Manor’s claim.
AFFIRMED.