Gardin v. Long Beach Mortg. Co.

• Decision Date: 07 May 2003
• Docket Number: No. 02-0109.,02-0109.
• Parties: Timothy L. GARDIN and Tammie S. Gardin, on behalf of themselves and all persons similarly situated, Appellants, v. LONG BEACH MORTGAGE COMPANY, Appellee.
• Court: Iowa Supreme Court

661 N.W.2d 193

Timothy L. GARDIN and Tammie S. Gardin, on behalf of themselves and all persons similarly situated, Appellants, v. LONG BEACH MORTGAGE COMPANY, Appellee.

No. 02-0109.

Supreme Court of Iowa.

May 7, 2003.

Mitchell Taylor of Cray, Goddard, Miller & Taylor, L.L.P., Burlington, Wood R. Foster, Jr. and Jordan M. Lewis of Siegel, Brill, Greupner, Duffy & Foster, P.A., Minneapolis, Minnesota, and Richard J. Bell of Bell Law Office, Mt. Pleasant, for appellants.

Michael Noyes and Judith L. Herrmann of Lane & Waterman, Davenport, Matthew M. Neumeier and Brian D. Hansen of Jenner & Block, L.L.C., Chicago, Illinois, for appellee. Susan M. Boe and Michael A. Giudicessi of Faegre & Benson L.L.P., Des Moines, for amicus curiae Iowa Land Title Association, Iowa Association of Realtors, Iowa Bankers Association, and Iowa Mortgage Association.

Dennis A. Dietz, Des Moines, for amicus curiae Iowa Finance Authority.

LAVORATO, Chief Justice.

Timothy L. and Tammie S. Gardin, class action plaintiffs in this case, appeal from a district court ruling sustaining a summary judgment motion filed by the defendant, Long Beach Mortgage Company (Long Beach). The Gardins contend that the district court erred in concluding as a matter of law that Long Beach had not collected fees in violation of Iowa Code section 535.8 (1999) in connection with a loan it made to the Gardins. We affirm.

I. Background Facts and Proceedings.

The Gardins entered into a loan brokerage agreement (Agreement) with Springfield Mortgage Company (SMC) on February 16, 1999. In the Agreement, the Gardins agreed to pay SMC a six-percent "loan commitment fee" if SMC successfully negotiated a loan for the Gardins. The loan was to be secured by a mortgage on residential real estate owned by the Gardins.

The Agreement further provided that the loan commitment fee "is a fee to the broker for its service on behalf of the borrower in obtaining the mortgage loan." Finally, the Agreement provided that "[t]he loan fee ... is an obligation of borrower upon commitment, and shall be paid at the time of the loan closing or out of the loan proceeds subject to the obligation of the borrower...." (Emphasis added.)

On the same day that it entered into the Agreement, the Gardins signed a "loan brokerage disclosure statement." The disclosure statement stated that SMC was licensed by the State of Iowa pursuant to Iowa Code section 535C.1 et seq. and "has been a mortgage broker of mortgage loans under the name of the broker since [1995]."

Acting pursuant to the Agreement, SMC made arrangements for the Gardins to borrow $39,750 from Long Beach. Long Beach is a wholesale lender and deals only with loan brokers.

SMC hired Rock Island County Abstract & Title Guarantee Company (RICA) as the closing agent for the loan. The closing occurred on May 20, 1999 at the Gardins' residence in Burlington, Iowa. A number of settlement charges were paid from the loan proceeds, all of which the Gardins included in the loan principal to be amortized over the life of the loan.

On July 13, 2000, the Gardins filed a class action against Long Beach, alleging violations of Iowa Code section 535.8. The statute limits charges that may be imposed on borrowers by lenders in connection with the purchase or financing of real property used for family dwellings. See Iowa Code § 535.8(2)(a),(b). The statute also provides borrowers with a private cause of action to recover all fees not permitted by the statute, together with attorney fees and costs. See Iowa Code § 535.8(2)(d).

Specifically, the Gardins alleged the following settlement charges paid out of the loan proceeds at the closing violated the statute: (1) a "loan origination" fee of $2,385, which exceeded two percent of the amount financed, in violation of Iowa Code section 535.8(2)(a); (2) an "underwriting fee" of $165.50, which was not an authorized charge under Iowa Code section 535.8(2)(b); (3) an "overnight fee" of $40, which was not an authorized charge under Iowa Code section 535.8(2)(b); (4) title insurance charges of $250, payable to a title company other than the Iowa Finance Authority, which was a violation of Iowa Code section 535.8(2)(b)(10); and (5) a closing fee of $250, which was not agreed to in writing and was a violation of Iowa Code section 535.8(2)(a).

Later, Long Beach filed a motion for summary judgment, which the Gardins resisted. The district court sustained the motion and dismissed the case.

II. Issues.

In its ruling the district court concluded that the $2,385 was a loan broker fee paid directly to SMC, and was therefore not paid to or collected by Long Beach in violation of the law. Similarly, the district court concluded that the $250 closing fee was paid directly to RICA and was therefore not paid to or collected by Long Beach in violation of the law. As for the remaining disputed amounts, the district court concluded that they accounted for less than two percent of the loan. Because the law allows a lender to collect up to two percent of the loan as a processing fee, the court concluded Long Beach could include the remaining disputed amounts in its processing fee.

The Gardins contend the district court (1) applied an unduly narrow meaning of the word "collect" as used in Iowa Code section 535.8; (2) erred in concluding that loan broker fees are not covered by the two percent limitation imposed by Iowa Code section 535.8(2)(a); (3) should have concluded as a matter of law that RICA acted as Long Beach's agent, rendering Long Beach vicariously liable for RICA's illegal charges; and (4) erred in concluding a lender may charge fees not otherwise permitted by Iowa Code section 535.8(2)(b) as long as the sum of such fees does not exceed two percent of the loan amount.

In their petition the Gardins challenged the title insurance charges of $250. This amount was paid to RICA and represented a $100 fee for a title insurance commitment and $150 for a title search and abstracting fees. On appeal, the Gardins do not dispute the $150 title search and abstracting fees. Instead, for the first time on appeal, the Gardins argue that a $75 location endorsement fee paid out of the loan proceeds at closing was charged in violation of Iowa Code section 535.8(2)(b)(10). Because they failed to raise this issue in the district court, the Gardins have waived it. See Shill v. Careage Corp., 353 N.W.2d 416, 420 (Iowa 1984)

("It is a basic rule of appellate practice that questions not presented to and not passed on by the trial court cannot be raised or reviewed on appeal.").

III. Scope of Review.

We review a summary judgment ruling for correction of errors at law. Iowa R.App. P. 6.4; Sons of the Union Veterans of the Civil War v. Griswold Am. Legion Post 508, 641 N.W.2d 729, 731 (Iowa 2002). Summary judgment is appropriate only when the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law. Iowa R. Civ. P. 1.981(3); Grinnell Mut. Reinsurance Co. v. Jungling, 654 N.W.2d 530, 535 (Iowa 2002). We examine the record before the district court to determine whether any genuine issue of material fact exists and whether the court correctly applied the law. Sons of the Union Veterans,641 N.W.2d at 731. Where the only controversy concerns the legal consequences flowing from undisputed facts, summary judgment is the proper remedy. Am. Processing, Inc. v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd., 586 N.W.2d 325, 329 (Iowa 1998). Summary judgment is the appropriate remedy where questions of statutory interpretation are involved. Burton v. Univ. of Iowa Hospitals & Clinics, 566 N.W.2d 182, 185 (Iowa 1997).

IV. Statutory Interpretation.

Because our resolution of the issues involves statutory interpretation, we revisit several basic rules of statutory interpretation. We start with the often-repeated goal of statutory interpretation which is to discover the true intention of the legislature. Bernau v. Iowa Dep't of Transp., 580 N.W.2d 757, 761 (Iowa 1998).

Our first step in ascertaining the true intention of the legislature is to look to the statute's language. Id. We do not search beyond the express terms of a statute when that statute is plain and its meaning is clear. State v. Snyder, 634 N.W.2d 613, 615 (Iowa 2001). Moreover, we must read a statute as a whole and give it "its plain and obvious meaning, a sensible and logical construction." Hamilton v. City of Urbandale, 291 N.W.2d 15, 17 (Iowa 1980). Additionally, we do not construe a statute in such a way that would produce impractical or absurd results. United Fire & Cas. Co. v. Acker, 541 N.W.2d 517, 519 (Iowa 1995).

When the legislature has not defined words of a statute, we look to prior decisions of this court and others, similar statutes, dictionary definitions, and common usage. Bernau, 580 N.W.2d at 761.

V. Statutory Scheme at Issue.

Iowa Code section 535.8(2)(a) provides that "[a] lender may collect" certain fees. These include a "loan processing fee," which does not exceed two percent of the loan principal. The term "loan processing fee" is not defined in the statute. The lender may also collect a "commitment fee" as agreed to in writing by the parties, without limitation as to the amount of the fee. The statute describes this fee as "compensation to the lender solely for the use of money." The fee may be collected in addition to the "loan processing fee." Finally, the lender may collect a "closing fee" as agreed to in writing by the parties, without limitation as to the amount of the fee. The closing fee may be collected in addition to the "commitment fee," and/or the "loan processing fee."

Iowa Code section 535.8(2)(b) permits a lender to

collect in connection with a loan any of the following costs which are incurred by the lender in connection with the loan and which are disclosed to the

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