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Iowa Mortgage Center, L.L.C. v. Baccam

Supreme Court of Iowa

December 20, 2013

IOWA MORTGAGE CENTER, L.L.C., Appellant,
v.
Lana BACCAM and Phouthone Sylavong, Appellees.

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[Copyrighted Material Omitted]

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David N. May of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellant.

David A. Morse of Rosenberg & Morse, Des Moines, for appellees.

WIGGINS, Justice.

We are reviewing the district court's decision holding a lender did not meet its burden to prove a breach of contract on a loan agreement and promissory note, and even if the lender did prove a breach, it did not prove its damages. The lender appealed and we transferred the case to our court of appeals. The court of appeals affirmed the district court's decision, and the lender requested further review, which we granted. On further review, we hold that the record establishes as a matter of law the lender proved the existence of the contract based upon a loan agreement and promissory note. We also find the district court applied the wrong burden of proof to determine a breach and the amount of damages owed, if any, on the loan agreement and promissory note. Accordingly, we vacate that part of the court of appeals decision and reverse that part of the district court's judgment regarding the loan agreement and promissory note. We remand the case to the district court for reconsideration on the existing trial record so that the same district court judge can make findings of fact as to a breach and damages, if any, on the loan agreement and promissory note consistent with this opinion and enter the appropriate judgment. We affirm the court of appeals decision and the district court's judgment on the escrow payment claim because the lender did not appeal the district court's decision regarding the escrow payments.

I. Background Facts and Proceedings.

This case involves a dispute over a loan agreement and promissory note. The lender is Iowa Mortgage Center, L.L.C. (IMC). IMC is a mortgage broker and is not typically in the lending business. The borrowers are Lana Baccam and Phouthone Sylavong, husband and wife.

IMC made multiple loans to Baccam and Sylavong.[1] The loan at issue here is for $52,000 with an interest rate of twenty percent. On May 22, 2009, Baccam and Sylavong signed the loan agreement and promissory note.

IMC disclosed the total amount of interest on the loan to Baccam and Sylavong under a loan payment schedule. They were to pay $52,000 in interest over five years. IMC disbursed the loan proceeds directly to Baccam and Sylavong's creditors at the direction of Baccam.

IMC received forty-two payments against the loan from May 22 to September

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18, both from direct deposits of Baccam and Sylavong's checks and cash payments. IMC did not receive any payments subsequent to September 18. IMC did not have any sophisticated software to track the various loan payments. IMC's main accounting to determine payments received was IMC's bank statements. The bank statements did not show how IMC applied the payments to the loan or the interest calculations. Further, IMC did not calculate how it applied the payments to the interest and the principal. IMC contended the loan payment schedule attached to the loan determined how it applied the payments. Other than the loan payment schedule, Baccam and Sylavong did not receive any additional statements from IMC.

On February 15, 2011, IMC filed a petition to collect $41,568.65, the total principal due on the loan agreement and promissory note, from Baccam and Sylavong. IMC also claimed Baccam and Sylavong owed an additional $355.89 for escrow payments IMC made on Baccam and Sylavong's behalf. IMC did not request any interest on the loan itself. The only interest requested by IMC in its petition was interest at the statutory rate from the date of filing the petition. IMC also asked for attorney fees and costs. Baccam and Sylavong answered by denying the material allegations contained in the petition and filed a counterclaim alleging unfair debt collection practices.[2] IMC filed a motion to dismiss the counterclaim. The district court granted the motion to dismiss the counterclaim.

The district court held a bench trial on the remaining issues. The trial judge issued a ruling finding IMC did not meet its burden of proof to prevail on the contract claim for monies owed it on the loan agreement and promissory note because it did not show evidence of the terms of the alleged agreement and repayment schedule. Further, the district court determined that even if there was an enforceable contract, IMC failed to meet its burden to prove damages.

IMC appealed the decision. We transferred the case to our court of appeals. The court of appeals affirmed the district court's decision. IMC ...


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