IN THE SUPREME COURT OF IOWA

No.12–0338

Filed December 20, 2013

IOWA MORTGAGE CENTER, L.L.C.,

Appellant,

vs.

LANA BACCAM and PHOUTHONE SYLAVONG,

Appellees.

On review from the Iowa Court of Appeals.

Appeal from the Iowa District Court for Polk County, Robert J. 

Blink, Judge.

A lender seeks further review of a court of appeals opinion 

affirming a judgment entered in favor of the borrowers. DECISION OF 

COURT OF APPEALS AFFIRMED IN PART AND VACATED IN PART; 

DISTRICT COURT JUDGMENT AFFIRMED IN PART, REVERSED IN 

PART, AND CASE REMANDED.

David N. May of Bradshaw, Fowler, Proctor & Fairgrave, P.C., 

Des Moines, for appellant.

David A. Morse of Rosenberg & Morse, Des Moines, for appellees.
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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.
3

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 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. 

 

1There were two previous lawsuits between IMC and Baccam and/or Sylavong in 

small claims court in Polk County. These lawsuits were on different loan notes. The 

district court recognized that the only loan at issue here was the $52,000 loan. 
4

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 

requested further review, which we granted.

II. Standard of Review.

The standard of review for a breach of contract action is for 

correction of errors at law. NevadaCare, Inc. v. Dep’t of Human Servs., 

783 N.W.2d 459, 465 (Iowa 2010). If substantial evidence in the record 

supports a district court’s finding of fact, we are bound by its finding. Id. 

However, a district court’s conclusions of law or its application of legal 

principles do not bind us. Id.

 

2Both parties had different counsel at the trial stage of this case. 
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III. Issues.

We must decide whether the district court erred as a matter of law 

when it determined IMC did not meet its burden to prove the existence of 

an obligation created by the loan agreement and promissory note. If it 

did, we must then decide whether the district court erred as a matter of 

law when it determined IMC did not meet its burden of proof as to a 

breach and damages on the loan agreement and promissory note.

A. Whether the District Court Erred as a Matter of Law When 

It Determined that IMC Did Not Meet Its Burden to Prove the 

Existence of a Contract. To prove a breach of contract claim, a party 

must show: 

(1) the existence of a contract; (2) the terms and conditions 

of the contract; (3) that it has performed all the terms and 

conditions required under the contract; (4) the defendant’s 

breach of the contract in some particular way; and (5) that

plaintiff has suffered damages as a result of the breach. 

Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224

(Iowa 1998). The first three elements address the existence of a contract. 

The last two elements address the breach of the contract and the 

damages caused by the breach.

1. The loan agreement and promissory note. At trial, IMC 

introduced the loan agreement and promissory note into evidence. 

During the course of the trial, IMC called Baccam as a witness. Baccam 

acknowledged she signed the loan agreement and promissory note. At 

the end of her testimony, the court and counsel had a discussion as to 

whether IMC had to call Sylavong to acknowledge that he signed the loan 

agreement and promissory note. The following colloquy occurred 

between the court and counsel.

[IMC’S TRIAL COUNSEL]: Your Honor, if [Baccam and 

Sylavong’s trial counsel] is willing to stipulate that the other 
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Defendant we have doesn’t dispute at least signing the loan 

document and receiving the proceeds in the form of paying 

these various creditors, I don’t need to call him to restate 

what’s already been stated.

THE COURT: Do you anticipate calling him as a 

witness?

[BACCAM AND SYLAVONG’S TRIAL COUNSEL]: I 

wasn’t anticipating calling him as a witness unless I need to 

rebut something. I don’t think it was our intention to dispute 

his signature on the note or that they received $52,000 from 

the plaintiff.

THE COURT: The dispute here is how much remains to 

be paid on the note; is that right?

[BACCAM AND SYLAVONG’S TRIAL COUNSEL]: That’s 

right.

THE COURT: Very well. Then I will accept that stipulation.

(Emphasis added.)

These stipulations are stipulations of fact. A stipulation of fact 

relieves a party from the inconvenience of proving the facts in the 

stipulation. Graen’s Mens Wear, Inc. v. Stille-Pierce Agency, 329 N.W.2d 

295, 300 (Iowa 1983). When construing the parties’ stipulation of fact, 

we attempt to determine and give effect to the parties’ intentions. Id. We 

interpret the stipulation “with reference to its subject matter and in light 

of the surrounding circumstances and the whole record, including the 

state of the pleadings and issues involved.” Id.

Applying these principles, the stipulation established as a matter 

of law the parties entered into a contract and the terms and conditions of 

the contract were contained in the loan agreement and promissory note. 

Further, the stipulation established as a matter of law IMC advanced 

$52,000 to Baccam and Sylavong under the terms of the loan agreement 

and promissory note. The only factual issue left to decide was how 

much, if anything, Baccam and Sylavong still owed on the loan 
7

agreement and promissory note. Thus, we hold as a matter of law IMC 

proved the existence of a contract, the terms and conditions of the 

contract, and that it performed all the terms and conditions required 

under the contract. 

2. The unpaid balances for escrow payments made by IMC. At trial 

IMC contended it advanced certain funds outside the loan agreement and 

promissory note regarding the escrow payments IMC made on Baccam 

and Sylavong’s behalf. In its brief, IMC stated:

[IMC] has elected to narrow the issues on appeal by waiving 

all claims to the additional escrow payments, that is, the 

payments beyond the $52,000 reflected on [the loan 

disbursement summary regarding the loan agreement and 

promissory note]. Accordingly, those escrow loans will not 

be discussed further except as necessary to explain the 

evidence presented at trial. 

In other words, IMC is not appealing the district court’s decision 

regarding the escrow payments IMC made on Baccam and Sylavong’s 

behalf. Accordingly, we affirm that part of the court of appeals decision 

affirming the district court’s judgment denying IMC any damages due to 

the escrow payments.

B. Whether the District Court Erred as a Matter of Law when 

It Determined IMC Did Not Meet Its Burden of Proof as to a Breach 

and Damages. Our rules of civil procedure provide: “The clerk shall not, 

unless by special order of the court, enter or record any judgment based 

on a note or other written evidence of indebtedness until such note or 

writing is first filed with the clerk for cancellation.” Iowa R. Civ. P. 1.961. 

The reason for this rule is, under our common law, when a holder of a 

promissory note is in possession of the promissory note, possession of 

the promissory note “raises a rebuttable presumption that a note was not 

paid.” In re Estate of Rutter, 633 N.W.2d 740, 747 (Iowa 2001). Once the 
8

holder of the promissory note introduces the promissory note into 

evidence, the borrower may then claim he or she made more payments 

on the promissory note. In an action on a promissory note, we recognize 

this claim by the borrower as the defense of payment. The defense of 

payment in an action is an affirmative defense. Glenn v. Keedy, 248 Iowa 

216, 221, 80 N.W.2d 509, 512 (1957). The burden is on the borrower to 

prove his or her defense of payment. Id. In an action on a promissory 

note, where the holder of the promissory note claims less than the total 

amount is due and owing on the promissory note, the rebuttable 

presumption of nonpayment only applies to the amount the holder 

claims is still due and owing. See Burch Mfg. Co. v. McKee, 231 Iowa 

730, 731–33, 2 N.W.2d 98, 99 (1942) (applying the presumption of 

nonpayment to the balance due on a promissory note of $145 after 

conceding the borrower made payments up to the sum of $155). 

When filing a petition on a promissory note, the petition is required 

to “contain a short and plain statement of the claim showing that the 

pleader is entitled to relief and a demand for judgment for the type of 

relief sought.” Iowa R. Civ. P. 1.403. In other words, the pleadings of the 

note holder frame the issues against which the borrower must defend. 

The district court did not follow these legal principles concerning 

actions on promissory notes when it found IMC failed to meet its burden 

a breach occurred or IMC failed to prove damages. IMC’s petition 

acknowledged Baccam and Sylavong had paid down some of the 

principal due on the loan agreement and promissory note. At trial, IMC 

acknowledged it received $15,763 in payments on the loan agreement 

and promissory note from Baccam and Sylavong, leaving a net balance 

on the loan principal of $36,237. Thus, the pleadings and evidence 
9

introduced by IMC establish IMC’s claim Baccam and Sylavong owed 

$36,237 in principal on the loan agreement and promissory note.3 

Because IMC had possession of the loan agreement and 

promissory note, a rebuttable presumption exists that Baccam and 

Sylavong owed this balance on the loan agreement and promissory note.

Thus, the burden then shifts to Baccam and Sylavong to prove they 

made additional payments on the loan agreement and promissory note. 

The court erred by requiring any further proof from IMC that Baccam 

and Sylavong owed a balance of $36,237 on the loan agreement and 

promissory note. Additionally, the court erred by not considering 

evidence that Baccam and Sylavong made additional payments on the 

loan agreement and promissory note above the $15,763 IMC 

acknowledged it received.

Having found that as a matter of law IMC proved the existence of a 

contract, the terms and conditions of the contract, and that it performed 

all the terms and conditions required under the contract, we must vacate 

the district court’s decision and remand the case for reconsideration on 

the existing trial record by the same district court judge to make findings 

of facts and conclusions of law on the breach and damages regarding the 

loan agreement and promissory note. See Boyle v. Alum-Line, Inc., 710 

N.W.2d 741, 752 (Iowa 2006). Upon doing so, the district court shall 

apply the proper burden of proof as to the parties’ claims and enter the 

appropriate judgment. 

Under this record, the only factual issue for the district court to 

decide is whether Baccam and Sylavong met their burden of proof that 

 

3IMC’s claim does not include any interest due under the loan agreement and 

promissory note because IMC has waived any claim to interest on the loan agreement 

and promissory note in its petition and is only seeking a judgment for the unpaid 

principal. 
10

they made additional payments on the loan agreement and promissory 

note. If they did not carry their burden, the court shall enter judgment 

in favor of IMC for $36,237. If the court finds Baccam and Sylavong met 

their burden by proving they made additional payments, the court shall 

deduct the amount of additional payments found by the court from the 

$36,237 and enter judgment for that amount.

IV. Conclusion and Disposition.

We hold as a matter of law a contract existed in the form of a loan 

agreement and promissory note between the lender, IMC, and the 

borrowers, Baccam and Sylavong. We hold as a matter of law IMC 

performed its obligation under the loan agreement and promissory note.

We also hold the district court applied the wrong legal analysis for an 

action on a promissory note concerning breach and damages; therefore, 

it committed reversible error. 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 the breach and damages, if any, on the loan agreement and 

promissory note consistent with this opinion and enter the appropriate 

judgment. If the district court finds IMC is entitled to a judgment, it 

shall also consider IMC’s request for attorney fees. We affirm the court of 

appeals decision and the district court’s judgment on the escrow 

payment claim because IMC did not appeal the district court’s decision

regarding the escrow payments.

DECISION OF COURT OF APPEALS AFFIRMED IN PART AND 

VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED IN 

PART, REVERSED IN PART, AND CASE REMANDED.

All justices concur except Appel, J., who takes no part.