Meincke v. Northwest Bank & Trust Co.
Iowa Supreme Court
756 N.W.2d 223 (Iowa 2008)
Janice Meincke (plaintiff) held a mortgage on Scramm Enterprises' property behind an existing lender, and Northwest Bank & Trust Co. (defendant) agreed to lend Scramm additional funds to pay off that prior lender only if Northwest obtained first-priority status ahead of Meincke's mortgage; Meincke, told by her nephew only that she needed to sign to be second in line, signed a subordination agreement without further inquiry and later admitted at trial that her signing must have helped Scramm and Craig somehow, since they had asked her to sign it. Northwest made the new loan, Scramm paid off the prior lender, and Northwest later foreclosed, leaving Meincke's now-subordinated mortgage unpaid; the trial court upheld the subordination agreement, but the Iowa Court of Appeals reversed for lack of consideration, and Northwest appealed.
Whether a legal detriment to the promisee is sufficient to constitute consideration if the promisee promises to perform an act, regardless of how slight or inconvenient, that the promisee is not otherwise obligated to perform, so long as it is done at the promisor's request and in exchange for the promise.