Broad Enforcement of Iowa’s Credit Agreement Statute of Frauds: Bar to Tort Claims Arising from Unwritten Agreements

Introduction

County Bank v. Shalla (Iowa 2025) centers on a dispute arising from an oral promise to secure financing for a farm‐repurchase option and subsequent claims of negligence and fraudulent misrepresentation. After foreclosing on Clint Shalla’s farm and entering into a written debt‐settlement agreement with the Kochs—including an exclusive written option to repurchase—the Shallas sought bank financing when the option deadline approached. They allege that Christopher Goerdt, then president of Peoples Trust & Savings Bank, orally agreed to “take care of the buyback” and secure funding. When the option lapsed, the Shallas renegotiated a new purchase price, obtained financing from County Bank (through Goerdt), and later discovered that Goerdt had misappropriated funds. County Bank foreclosed, and the Shallas counterclaimed against County Bank and third‐party‐claimed Peoples Bank and Goerdt for negligence, fraudulent misrepresentation, conversion, and other torts. The dispositive issue on further review: whether Iowa’s credit agreement statute of frauds (Iowa Code § 535.17) bars tort claims that rest on oral terms of an unwritten credit agreement.

Summary of the Judgment

The Iowa Supreme Court unanimously affirmed the district court and Court of Appeals. It held that:

Under Iowa Code § 535.17, a “credit agreement” includes any contract to loan money or finance a transaction and “all of the terms” of such an agreement—even oral ones.
An unwritten credit agreement is unenforceable unless its material terms appear in a signed writing.
The statute’s anti‐circumvention clause (subsection (7)) displaces common‐law or equitable exceptions, preventing plaintiffs from repackaging contract claims as torts to avoid the writing requirement.
The Shallas’ negligence and fraudulent misrepresentation claims against Peoples Bank and Goerdt—premised on Goerdt’s oral promise to secure financing—were barred by § 535.17.
County Bank was awarded appellate attorney fees under Iowa Code § 625.22.

Analysis

Precedents Cited

Iowa Code § 535.17 (2018)—the “credit agreement” statute of frauds—defines “credit agreement” broadly and mandates written evidence of all material terms.
§ 535.17(6) & (7)—statutory directives to interpret the provision purposively and to displace common‐law or equitable exceptions.
State v. Pettijohn, 899 N.W.2d 1 (Iowa 2017)—respecting legislative definitions as lexicography.
Clinton Nat’l Bank v. Saucier, 580 N.W.2d 717 (Iowa 1998)—highlighting that § 535.17(6) controls over any ambiguity.
Sanborn Savings Bank v. Freed, 38 F.4th 672 (8th Cir. 2022)—applying Iowa law to hold equitable defenses displaced by § 535.17(7).
Geiger v. Peoples Trust & Savings Bank, No. 18-1428, 2019 WL 4678179 (Iowa Ct. App. Sept. 25, 2019)—refusing to allow tort recharacterizations of barred credit agreements.
Twiford Enterprises, Inc. v. Rolling Hills Bank & Trust, No. 20-CV-28-F, 2020 WL 5248561 (D. Wyo. Aug. 5, 2020)—federal court applying § 535.17 to bar negligence and misrepresentation claims.

Legal Reasoning

1. Plain Language and Definitions
The Court began with the text of § 535.17, which unambiguously defines a “credit agreement” as any contract to loan money, finance a transaction, or extend credit, “including all of the terms of the contract.” By statutory definition, an oral promise to secure financing—even ancillary representations about assisting with a buyback option—falls within that statutory scope.

2. Statutory Purpose and Anti-Circumvention
Section 535.17(6) directs courts to interpret the statute purposively: to ensure clear, predictable, and fraud-resistant credit transactions. Subsection (7) explicitly displaces common‐law and equitable doctrines that would otherwise allow plaintiffs to bypass the writing requirement. A narrow reading that exempts tort claims would undermine this legislative design.

3. Rejection of Artful Pleading
By repackaging a contract‐based cause of action as negligence or fraudulent misrepresentation, the Shallas attempted an “end run” around the statute’s writing requirement. The Court declined to sanction such artifice, aligning with Iowa and out-of-state authorities that uniformly bar tort claims rooted in unenforceable oral credit agreements.

Impact

• Litigation Strategy: Plaintiffs can no longer rely on tort theories to enforce the terms of an unwritten credit agreement in Iowa. Counsel must secure written, signed documentation of all material terms before advancing claims.

• Banking and Finance: Lenders gain assurance that all enforceable commitments are documented. Farmers, developers, and other borrowers must insist on written agreements for any financing-related promise.

• Statutory Clarity: The decision underscores the force of § 535.17’s anti-circumvention language, solidifying the statute’s nationwide reputation as one of the broadest credit‐agreement fraud statutes of frauds.

Complex Concepts Simplified

Credit Agreement (Iowa Code § 535.17): Any contract to lend or finance, including all promises—written or oral—about terms, interest, fees, or collateral.
Statute of Frauds: A rule requiring certain contracts to be in writing and signed to be enforceable, designed to prevent fraudulent or fabricated oral agreements.
Anti-Circumvention Clause: A statutory provision (here § 535.17(7)) that prohibits using other legal theories (equity, tort) to avoid the writing requirement.
Directed Verdict: A judge’s ruling before jury deliberation, deciding that no reasonable jury could find for the plaintiff on a given claim.
Deed in Lieu of Foreclosure: A property owner’s voluntary transfer of the deed to the lender to avoid a formal foreclosure sale.

Conclusion

County Bank v. Shalla clarifies and fortifies Iowa’s credit agreement statute of frauds. The Supreme Court confirms that § 535.17 bars not only contract‐based enforcement of unwritten credit agreements but also any tort claims—like negligence or fraudulent misrepresentation—rooted in oral promises to finance. Practitioners must ensure that all material terms of a financing arrangement appear in a signed writing. This ruling promotes lending certainty, protects against oral‐agreement fraud, and upholds the legislature’s explicit intent to displace common‐law or equitable detours around the statute of frauds.