Luana Savings Bank v. Ronald Caspersen
16-1013
| Iowa Ct. App. | Mar 22, 2017Background
- In April 2009 Luana Savings Bank made two loans to William and Shelly Mack: a $71,350 loan secured by an open-end mortgage on 209 Truman Street (mortgagors: the Macks) and a separate $17,000 consumer loan signed by the Macks and co-signer Ronald Caspersen.
- The $17,000 note listed three vehicles as security, included a generic "Other Security" clause, an "Obligations Independent" clause, and stated the loan purpose as "Balance Of Home Purchase," but did not identify the real estate or reference the mortgage instrument.
- The Macks executed a voluntary nonjudicial foreclosure process under Iowa Code § 654.18, conveyed the property to the Bank in lieu of foreclosure, and the Bank sold the property for $80,000; the Bank waived any deficiency claim against the Macks.
- Caspersen continued paying on the $17,000 note until June 2015; after default on a balloon payment, the Bank sued the Macks and Caspersen for the remaining balance (later dismissing the Macks).
- The district court held the $17,000 note was secured by the mortgage and applied the foreclosure sale surplus against Caspersen’s balance, reducing judgment; the Bank appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the $17,000 promissory note was secured by the mortgage on the real estate | Note is not secured by mortgage because it does not reference the mortgage, names vehicles as security, and Caspersen is not a mortgagor | The mortgage was incorporated as security via the note’s "Other Security" clause and parties’ intent, so Caspersen entitled to surplus offset | The $17,000 note was not secured by the mortgage; Caspersen not entitled to surplus offset |
Key Cases Cited
- Soults Farms, Inc. v. Schafer, 797 N.W.2d 92 (Iowa 2011) (mortgage interpretation follows contract principles)
- Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430 (Iowa 2008) (cardinal rule of contract interpretation is determining parties’ intent)
- Fausel v. JRJ Enters., Inc., 603 N.W.2d 612 (Iowa 1999) (words and conduct interpreted in light of all circumstances)
- NevadaCare, Inc. v. Dep’t of Human Servs., 783 N.W.2d 459 (Iowa 2010) (standard of review for errors at law and deference to district court factual findings)