Commercial Federal Bank v. James A. Hagen & Jane R. Hagen,
No. 1-540 / 00-1502 (Iowa App. 11/16/2001)
COURT OF APPEALS OF IOWA
November 16, 2001, Filed
NOTICE: [*1] NO DECISION HAS BEEN MADE ON PUBLICATION OF THIS OPINION. THE OPINION
IS SUBJECT TO MODIFICATION OR CORRECTION BY THE COURT AND IS NOT FINAL UNTIL THE
TIME FOR REHEARING OR FURTHER REVIEW HAS PASSED. AN UNPUBLISHED OPINION OF THE
COURT OF APPEALS MAY NOT BE CITED BY A COURT OR BY A PARTY IN ANY OTHER ACTION.
PRIOR HISTORY: Appeal from the Iowa District Court for Worth County, James M. Drew, Judge.
Defendants appeal a district court order entering judgment in favor of the plaintiff and against
them and foreclosing the mortgage in the plaintiff's mortgage foreclosure action.
COUNSEL: David M. Nelsen of Nelsen Law Office, Mason City, for appellants.
Thomas H. Burke and August B. Landis of Whitfield & Eddy, Des Moines, for appellee.
JUDGES: Considered by Sackett, C.J., and Vogel and Vaitheswaran, JJ.
OPINION: VOGEL, J.
Defendants appeal the decision of the district court which entered judgment for the Bank and
foreclosed the mortgage on their homestead. They claim: (1) there is no evidence to allow the
Bank to be given a judgment against their homestead, and (2) the Bank is not entitled to have a
personal judgment entered against them. We affirm.
James and Jane [*2] Hagen, husband and wife, were farmers in Worth County. In 1996, they began
banking with Liberty Bank and Trust, now Commercial Federal Bank (Bank). Their loan officer,
Randall Finer, was also a social friend. In 1996 and 1997, the Hagens obtained operating loans
for their farming operation from the Bank. In 1996, the Hagens had given the Bank a continuing
security interest in their farm equipment and products.
On February 28, 1998, the Hagens borrowed $ 200,000 from the Bank for 1998 farm operating
expenses. The security for this loan was the 1996 security agreement. On March 3, 1998, the
Hagens signed a promissory note for an additional $ 325,000. This note was used to pay off
previous loans and consolidate the Hagens' debt. At the same time the note was signed, the Hagens
signed an open-end real estate mortgage encumbering their homestead.
On March 1, 1999, James borrowed $ 50,000 from the Bank for 1999 farm operating expenses.
Although Jane did not sign that particular note, she had signed a continuing guaranty of all of
James's debts in March of 1998. In April of 1999, the Hagens decided not to put in any crops that
year and were soon unable to make payments on their various [*3] obligations with the bank.
On May 18, 1999, the Bank sent the Hagens a Notice of Default and Notice of Right to Cure.
Mediation was scheduled but the Hagens failed to appear. By a replevin action, the Bank obtained
possession of some of the Hagens' farm equipment and sold it at an auction, applying the proceeds
to their debt.
On July 13, 1999, the Bank filed a petition to foreclose its mortgage on the Hagens' homestead.
The Bank sought judgments in rem and in personam. The Hagens raised affirmative defenses,
claiming there had been no waiver of the homestead property exemption, the contract was
unconscionable, and the Bank's claims were barred by estoppel. They claimed they did not know
they had signed a mortgage, and had no intention of giving the Bank a mortgage on their
homestead. They claimed Finer had surreptiously obtained their signatures by "hiding" the
mortgage document among other papers they signed that day. In contrast, Finer testified he
explained the mortgage to the Hagens, and they voluntarily signed it.
The district court found the Hagens were not credible. The court noted the word "mortgage"
appeared many times on the document, including near the signature line. [*4] The trial court
determined the promissory notes were in default in the amount of $ 517,366.24 plus interest,
however the mortgage secured debt only up to $ 100,000. The court also entered a personal
judgment against the Hagens for the unpaid amount of their debt to the Bank. The Hagens appealed.
I. Scope of Review
Mortgage foreclosure proceedings are equitable in nature. Iowa Code § 654.1 (1999). Our scope of
review in this equity action is de novo. Iowa R. App. P. 4. Although we are not bound by them, we
give weight to the trial court's findings of fact, especially when considering the credibility of
witnesses. Iowa R. App. P. 14(f)(7).
II. Judgment Against Homestead
The Hagens contend the district court should not have entered a judgment against their homestead.
They claim Finer made false representations to them, which induced them to sign all the papers
presented to them, including the mortgage. They state no one told them the Bank wanted a mortgage
on their home. The Hagens assert Finer is not credible because he stated he did not have any
memory of specific conversations concerning the mortgage.
The general rule is that [*5] an agreement in writing speaks for itself and in the absence of
fraud or mistake, ignorance of the contents will not serve to negate or avoid its contents.
Advance Elevator Co., Inc. v. Four State Supply Co., Inc., 572 N.W.2d 186, 188 (Iowa Ct. App.
1997). A party's failure to read a contract before signing it does not invalidate the contract.
Huber v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993). We have stated:
It is also the settled rule of law that if a party to a contract is able to read, has the
opportunity to do so, and fails to read the contract, he cannot thereafter be heard to say that
he was ignorant of its terms and conditions, for the purpose of relieving himself from its
Gouge v. McNamara, 586 N.W.2d 710, 713 (Iowa Ct. App. 1998) (quoting Preston v. Howell, 219 Iowa
230, 236, 257 N.W. 415, 418 (1934)).
A person is bound by a document signed, but not read, unless the signing party was dissuaded from
reading it by some trick or artifice practiced by the opposite party. Id. Here, the Hagens claim
Finer did not show them the documents, and did not tell them there was a mortgage in the packet
[*6] of documents, but simply pointed where to sign.
The district court found the Hagens' argument was not persuasive. The document was clearly
entitled "OPEN-END REAL ESTATE MORTGAGE" and included on the front page the legal description as
well as the local address of the Hagens' homestead. The instrument encumbered the property
described in a paragraph entitled "MORTGAGE." The Hagens claim the document was hidden under
other papers, obstructing their sight and precluding them from reading the actual contents of the
document. However, for the Hagens to initial each page of the double-sided mortgage, the document
needed to be physically turned over several times until the final signatures were made on the
last page. Their argument failed to persuade the district court of any fraudulent behavior by the
bank and we also are unpersuaded.
Both Hagens signed the mortgage, just below this statement: "By signing below, Mortgagor agrees
to the terms and covenants in this Mortgage and in any attachments. Mortgagor also acknowledges
receipt of a copy of this Mortgage on the date stated above on Page 1." Below the acknowledgment
was a separate paragraph, containing the homestead exemption waiver [*7] which read:
(In the following statement "I" means the Mortgagor.) I understand that homestead property is in
many cases protected from the claims of creditors and exempt from judicial sale; and that by
signing this contract, I voluntarily give up my rights to this protection for this property with
respect to claims based upon this contract.
The Hagens signed directly below this waiver. The district court found and we agree the Hagens
are bound by the mortgage which they signed, which secured debt up to $ 100,000. The court
therefore properly found the bank had a valid first mortgage lien against the Hagen's homestead.
III. Judgment Against the Hagens
The Hagens contend the Bank was not entitled to a personal judgment against them. They assert the
Bank did not give reasonable notice as required by Iowa Code section 554.9504(3), which is part
of Article 9 of the Uniform Commercial Code in Iowa. We do not consider this issue preserved for
our review. It was not raised below and the district court did not rule on it. We do not address
issues raised for the first time on appeal. See Wesley Retirement Servs., Inc. v. Hansen Lind
Meyer, Inc., 594 N.W.2d 22, 29 (Iowa 1999). [*8]
In addition, section 554.9104(j) provides that Article 9 does not apply to "the creation or
transfer of an interest in or lien on real estate. . . ." Thus, the reasonable notice requirement
does not apply in this mortgage foreclosure proceeding.
We affirm the decision of the district court which entered a decree of foreclosure on the
mortgage the bank held on the Hagens' homestead and affirm the judgment against the Hagens.