Unambiguous “Satisfaction of Mortgage” Did Not Release Debtors’ Note

Mollie Pawlosky  Iowa Commercial Litigation Iowa Banking Dickinson Law Des Moines, Iowa

Posted on 11/11/2016 at 12:00 AM by Mollie Pawlosky

After defaulting on a home equity loan that was secured by a mortgage on their home, the Bradleys paid the mortgage holder, Bank of the West, $5000 in exchange for a satisfaction of mortgage.  Bank of the West sold the loan, including the right to pursue collection, to Mountain State Adjustment (“MSA”). MSA filed a breach of contract action on the note, to which the Bradleys responded that the mortgage and note had been satisfied in full.

The Iowa Court of Appeals in Mountain State Adjustment v. Bradley, No. 15-1005 (Sept 28, 2016), affirmed the trial court’s finding that the satisfaction of mortgage was not ambiguous. The document only referred to the mortgage and did not mention release of the note. The document was entitled, “Satisfaction of Mortgage,” described the mortgage in detail, and said the mortgage was satisfied.

Extrinsic evidence also supported the finding that the satisfaction only released the mortgage. For example, multiple exhibits demonstrated that the Bradleys were told that the debt had not been released, and Bradley’s work, which involved building homes and signing notes and mortgages, gave the Bradleys knowledge of the lending process.

Moreover, the appellate court also held that the Bradleys’ claim under the Iowa Consumer Credit Code (“ICCC”) failed, because the loan amount of $150,000 exceeded the

ICCC’s maximum amount of twenty-five thousand dollars, such that it was not a “consumer loan” under the ICCC. Thus, the Bradleys were not entitled to attorney’s fees under the ICCC, but MSA could be entitled to appellate attorney’s fees under the loan agreement.

Mountain State is a reminder that there are two separate legal documents in secured lending arrangements, each of which must be treated and analyzed separately to determine the parties’ positions. For further information regarding collections matters, contact Mollie Pawlosky.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

Mollie Pawlosky


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