Bank Of The West v. Kline
| Decision Date | 14 May 2010 |
| Docket Number | No. 08-1106.,08-1106. |
| Citation | 782 N.W.2d 453 |
| Parties | BANK OF THE WEST, Successor-In-Interest to Commercial Federal Bank, Appellant,v.Phyllis J. KLINE and Christine Walters, Appellees. |
| Court | Iowa Supreme Court |
782 N.W.2d 453
BANK OF THE WEST, Successor-In-Interest to Commercial Federal Bank, Appellant,
v.
Phyllis J. KLINE and Christine Walters, Appellees.
No. 08-1106.
Supreme Court of Iowa.
May 14, 2010.
David Swinton of Belin Lamson McCormick Zumbach Flynn, a Professional Corporation, Des Moines, for appellee Kline.
Jerrold Wanek of Garten & Wanek, Des Moines, for appellee Walters.
WIGGINS, Justice.
In this appeal, we must decide if two debtors can use the Equal Credit Opportunity Act (ECOA) as an affirmative defense to an action by a creditor to collect a debt. Because we find the debtors can use the ECOA in that manner and there is no genuine issue of material fact as to the creditworthiness issue raised by the creditor on appeal, we affirm the judgment of the district court granting the debtors' motions for summary judgment.
I. Background Facts and Proceedings.
In consideration of monies loaned to Acme Land Company, L.L.C., Acme made, executed, and delivered a promissory note in the initial principal sum of five million dollars with interest accruing at an initial rate of 4.75% per annum to Commercial Federal Bank (CFB). To secure payment on the note, on the same date, Acme made, executed, and delivered in favor of CFB a construction mortgage that encumbered certain real property located in Dallas
Thereafter, CFB, Commercial Federal Corporation (CFC), a Nebraska corporation, and Bank of the West, a California banking corporation, entered into a merger agreement. The merger caused both CFB and CFC to merge into Bank of the West, leaving Bank of the West as the only surviving corporation. Under the terms of the merger, Bank of the West acquired all the assets of CFB, including the promissory note, construction mortgage, and unlimited commercial guaranties executed in the Acme transaction.
Acme failed to repay the loan and consequently was in default pursuant to the terms of the promissory note. Bank of the West filed a mortgage foreclosure petition without redemption and suit on guaranties against Acme, John C. Kline, Inc., Randy Walters, Inc., John C. Kline, Phyllis J. Kline, Randal L. Walters, and Christine Walters. Christine answered the petition and alleged as an affirmative defense that the ECOA barred Bank of the West's claims against her. Christine also asserted her alleged ECOA violation as a counterclaim. Specifically, Christine alleged that Bank of the West obtained her unlimited commercial guaranty solely because she was the spouse of Randal Walters and not because other parties obligated to the bank were not sufficiently creditworthy to satisfy Acme's obligations. Thus, Christine claimed Bank of the West unlawfully discriminated against her based on her marital status in violation of the ECOA, rendering her guaranty void and unenforceable.
Phyllis also filed an answer to Bank of the West's petition. Although Phyllis did not assert an alleged ECOA violation as either an affirmative defense or a counterclaim, she did file a cross-claim against her ex-husband, John C. Kline, for failing to indemnify and hold her harmless from her guaranty pursuant to the terms of their dissolution decree. In response to the cross-claim, John filed a counterclaim for indemnification against Bank of the West, alleging that the bank violated the ECOA by obtaining Phyllis's guaranty solely because she was his spouse. Thus, John claimed Bank of the West unlawfully discriminated against Phyllis on the basis of her marital status in violation of the ECOA, rendering her guaranty void and unenforceable. Phyllis eventually filed an amended answer asserting the bank's violations of the ECOA as an affirmative defense and a counterclaim for declaratory and equitable relief.
In response to both Christine's and John's counterclaims, Bank of the West claimed as affirmative defenses: (1) Christine, Phyllis, and John could not raise an ECOA violation claim because they do not qualify as “applicants” under the ECOA, and (2) the two-year statute of limitations under the ECOA has expired barring Christine's, Phyllis's, and John's ECOA violation claims.
The parties filed cross-motions for summary judgment. The district court ruled on Bank of the West's motion for summary judgment as well as the defendants' cross-motions for summary judgment. The district court granted the bank's motion as to defendants, Acme, Randy Walters, Inc., John C. Kline, and Randal L. Walters and entered judgment against them on the notes and guaranties. As to Christine and Phyllis, the court held they both could
As a result, the district court appeared to dismiss Christine's and Phyllis's ECOA counterclaims, allow Christine and Phyllis to raise the ECOA violations as affirmative defenses, and grant the defendants' cross-motions for summary judgment as it pertained to Christine's and Phyllis's ECOA affirmative defenses-rendering Christine's and Phyllis's unlimited commercial guaranties void and unenforceable.
Apparently, the parties were confused as to the effect of the district court's summary judgment ruling. Phyllis filed a motion to amend the court's ruling to confirm the dismissal of Bank of the West's petition with regard to Christine and Phyllis. Likewise, Bank of the West filed a motion to enlarge or amend the district court's ruling. In its motion, the bank sought a clarification that the district court only ruled Christine and Phyllis could assert the alleged ECOA violations as affirmative defenses, but did not substantively dispose of the bank's claims against Christine and Phyllis as a matter of law. Additionally, the bank moved the court to amend its ruling to reflect that there exists a question of material fact regarding whether or not Christine's and Phyllis's husbands were creditworthy at the time Christine and Phyllis executed their guaranties.
Meanwhile, both parties proceeded to prepare for trial. Bank of the West filed its trial brief. Prior to the trial date, the district court ruled on the parties' motions for clarification of the court's summary judgment ruling. The court stated that in its summary judgment ruling it concluded there were no genuine issues of material fact as to the validity of Christine's and Phyllis's ECOA affirmative defenses. Thus, the court stated that it should have dismissed Bank of the West's actions against Christine and Phyllis. Consequently, the court granted Christine's and Phyllis's cross-motions for summary judgment and dismissed Bank of the West's petition as to Christine and Phyllis. This ruling disposed of all issues in the case, and there was no need for a trial. Bank of the West filed a notice of appeal from the district court's ruling dismissing its claims against Christine and Phyllis.
II. Issues.
This case presents three issues: (1) whether Christine and Phyllis can assert an ECOA claim and/or affirmative defense, (2) whether Christine and Phyllis can assert an ECOA violation as an affirmative defense to void their guaranties even after the statute of limitations for an offensive claim under the ECOA has run, and (3) whether there remains disputed material facts as to whether Bank of the West violated the ECOA by requiring Christine's and Phyllis's personal guaranties.
III. Scope of Review.
We review an order granting summary judgment for correction of errors at law. Hills Bank & Trust Co. v. Converse, 772 N.W.2d 764, 771 (Iowa 2009). Summary judgment is appropriate if the moving party has met his or her burden of showing the nonexistence of a material fact. Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 434 (Iowa 2008). “The nonmoving party [is] afforded every legitimate inference that can be reasonably
IV. Whether Christine and Phyllis Can Assert Violations of the ECOA.
Bank of the West argues the district court erred by holding Christine and Phyllis could assert violations of the ECOA. The district court concluded Christine and Phyllis could assert ECOA violations because they were required to execute personal guaranties even though there was no prior determination by CFB that their spouses were not sufficiently creditworthy. Bank of the West claims Christine and Phyllis cannot assert ECOA violations because they do not qualify as “applicants”...
To continue reading
Request your trial
-
RL BB Acquisition, LLC v. Bridgemill Commons Dev. Grp., LLC
...can be asserted as an affirmative defense, and those courts have generally taken one of three positions. See Bank of the West v. Kline, 782 N.W.2d 453, 459–61 (Iowa 2010). First, several courts, including the district court in this case, have held that ECOA violations cannot be raised as an......
-
Regions Bank v. Legal Outsource PA
...Court of Iowa, which applied Regulation B without considering Moran or whether it was entitled to deference, see Bank of the West v. Kline , 782 N.W.2d 453, 458 (Iowa 2010). So when Congress amended the Act in 2010, the weight of reasoned authority was against the Board’s definition of appl......
-
Simmons v. State Pub. Defender
...terms of a contract, the terms are not enforceable if they are contrary to the intent of the enabling statute. See Bank of the West v. Kline, 782 N.W.2d 453, 462 (Iowa 2010) ("It is well-established Iowa law that contracts made in contravention of a statute are void, and Iowa courts will no......
-
In re Westbrooks
...However, the definition of "applicant" was amended in 1985 specifically to include these parties. Id.; see also Bank of the West v. Kline, 782 N.W.2d 453, 457 (Iowa 2010); Durdin v. Cheyenne Mountain Bank, 98 P.3d 899, 902 (Colo.App.2004); Ford v. Citizens & S. Nat'l Bank, 700 F.Supp. 1121,......