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Klinge v. Luana Savbings Bank

Court of Appeal of Iowa

November 6, 2013

JASON KLINGE, Plaintiff-Appellant,
LUANA SAVINGS BANK, Defendant-Appellee.

Appeal from the Iowa District Court for Clayton County, John J. Bauercamper, Judge.

A borrower appeals following a jury verdict in favor of a lender on the borrower's claims alleging violations of the terms of an interest assistance agreement.

Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.

Dale L. Putnam, Decorah, for appellee.

Considered by Vaitheswaran, P.J., and Doyle and Danilson, JJ.


Jason Klinge appeals following jury verdict in favor of Luana Savings Bank on Klinge's claims alleging violations by Luana of the terms of the parties' 2000 interest assistance agreement. The district court upheld the verdict, denying Klinge's motion for new trial. We affirm.

I. Background Facts and Proceedings

Viewing the evidence in the light most favorable to the verdict, the jury could find the facts substantially as follows.

In June 2000, Jason Klinge obtained a variable interest agricultural operating loan from Luana Savings Bank, [1] in which Luana agreed to lend Klinge $250, 000 at an interest rate equal to Luana's "base rate, " which was 11.65% at that time.[2] Klinge also entered a separate but related agreement entitled an "Interest Assistance Agreement" with Luana and the U.S. Department of Agriculture's Farm Service Agency (FSA), [3] in which the FSA agreed to reimburse Luana four percentage points of interest in exchange for Luana agreeing to pass this on to Klinge as a discount on his loan.[4]

Reading the loan documents together, the interest rate on Klinge's loan was to begin at 4% less than 11.65%, Luana's base rate at the time, or 7.65%. In addition, because the interest rate was variable (i.e., the "future rate" would be "equal to" the "announced base rate of Luana Savings Bank"), Luana was to comply with federal regulations governing interest rates, including 7 C.F.R. part 762.150.[5] Per that regulation, although the interest rate on KIinge's loan would vary, Luana could not exceed the rate it charged its "average agricultural loan customer."

In essence, over the course of the loan, Luana was to charge Klinge an interest rate in accordance with the federal regulations, and then give Klinge a four percent discount on that interest rate, and the FSA would reimburse Luana for this discount.

Klinge's loan was paid by renewal in 2003, and ultimately paid in full in 2007. Meanwhile, Klinge learned other Luana customers were being charged interest rates lower than his. He also "became aware of the specific language of the relevant regulations, " and confronted Luana with the regulations, accusing it of charging him more than "its average agricultural loan customer." See 7 C.F.R. § 762.150(g) ("Rate of interest. The lender may charge a fixed or variable interest rate, but not in excess of what the lender charges its average agricultural loan customer.").

In response, Luana reduced Klinge's interest rate by approximately 2.5%, which further ignited Klinge's belief Luana "had engaged in a practice of overcharging" him. According to Luana, however, it reduced Klinge's rate merely as a "concession" "just to get [Klinge] out of the bank and out the door" after he came in several times "basically threatening a lawsuit."

In 2008, Klinge filed a petition at law, alleging Luana was in breach of contract by charging him a higher interest rate than its average agricultural loan rate in violation of 7 C.F.R. part 762.150(g). Luana filed an answer and asserted affirmative defenses.[6]

Luana filed a motion for summary judgment, claiming there was no genuine issue of material fact because Klinge "was at all time[s] charged the base rate and given the 4% discount." Following a hearing, the district court entered an order granting Luana's motion for summary judgment, finding "[w]hile the supporting documents indicate some banking customers were charged a different rate than the plaintiff, it is clear that the bank strictly complied with the terms and conditions of the loan agreement . . . ." The district court did not, however, reference the interest assistance agreement or the requirement that Klinge's interest rate not exceed that charged for an average agricultural loan customer.

On appeal, this court reversed, finding "the record lacks evidence to determine whether Klinge was charged a rate no higher than the bank's average agricultural loan customer." Klinge v. Luana Sav. Bank, No. 09-1856, 2010 WL 4140463, at *5 (Iowa Ct. App. Oct. 20, 2010). We determined this was a genuine issue of material fact that precluded summary judgment. Id. We observed there was evidence Klinge "was charged the base interest rate at all times, " but found "there is no showing that the base rate was equivalent to the average agricultural loan rate." As we stated:

In other words, the record does not affirmatively show the rate charged to Klinge complied with 7 C.F.R. part 762.150 as required by ...

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