Homestead Exempt From Execution – Debt Not An Antecedent Debt

Hedge-to-arrive” commodities contracts are commonly used in futures trading. At the time the contract is signed, the futures price is locked in but the basis is not yet set. Generally, sellers of grain enter into a HTA when they believe the futures price is high and about to drop. Here, a farm corporation entered into four separate HTA’s with a local ag supplier/grain merchandiser in 2006.  In 2007, the owners of the corporation (husband and wife) secured a line of credit from the supplier to finance their farming operations. Unfortunately, the corporation sold all of its corn on the open market and could not honor the HTA contracts at the date specified for delivery in the contracts.  The supplier sued the corporation for breach of contract, and also sued the couple for failing to guarantee the debt of the corporation based on the line of credit.  The trial court found in favor of the supplier on both claims, and the supplier sought to execute the court’s judgment by a levy upon the real estate that the couple owned.  

The court set a date for a sheriff’s sale of the property, but the couple and farming corporation filed a motion to stop the execution of the court’s judgment.  They claimed that the property was exempt from execution as their homestead. The trial court agreed and the supplier appealed.

On appeal, the supplier argued that the couple was indebted to them through the line of credit before they obtained an interest in the new homestead in 2007, thus the debt was. Essentially, the supplier argued that the debt was an antecedent debt for which a homestead could be sold to satisfy a court’s judgment under Iowa law (Iowa Code 561.21.).   But, the appellate court disagreed with the supplier’s argument.  The appellate court determined that the HTA’s were a contract between the corporation and the supplier, not the couple and the supplier. The couple did not personally guarantee the HTA contracts until they signed a line of credit with the supplier, and that didn’t occur until after they acquired the homestead.  So, the debt not an antecedent debt and the homestead was exempt from execution.  AgVantage FS, Inc. v. Western Farming, Inc., et al., No. 1-311/10-1820, 2011 Iowa App. LEXIS 656 (Iowa Ct. App. Jul. 13, 2011).