A couple tried to block foreclosure by pointing to a banker's verbal loan promise – but Iowa’s highest court says that's not enough
A long-running legal battle over a failed farmland repurchase came to an end on May 9, when the Iowa Supreme Court ruled that oral promises to secure a loan aren’t enough to hold a bank – or its former executive – legally accountable.
The case, which stretches back over a decade, began in 2014 when Clinton Allan Shalla faced foreclosure on his family farm. To avoid losing the property in a sheriff’s sale, Shalla entered into a debt settlement with private buyers, Greg and Heather Koch. Under the agreement, the Kochs bought the land for just under $500,000 and gave Shalla an exclusive option to repurchase it for the same price, plus fees and interest, if he gave written notice and presented firm financing by August 15, 2015.
Clint’s wife, Michelle Lynn Shalla, who wasn’t named in the agreement but did sign away her marital interest in the property, later joined the legal fight.
As the deadline loomed, Shalla turned to Chris Goerdt, then the president of Peoples Trust and Savings Bank, to help secure a loan. According to Shalla, Goerdt verbally agreed to “take care of the buyback.” But no written loan commitment ever materialized, and the August deadline came and went.
Later that year, the Kochs agreed to sell the farm back - but at a higher price: roughly $1.25 million. Goerdt, now working for County Bank, helped the Shallas secure a $1.3 million loan to complete the new purchase. The closing took place in January 2016, and the mortgage was secured by the farm.
But red flags began to appear quickly. Goerdt directed Shalla to take $25,000 in cash from the proceeds and hand it over in a Subway parking lot - purportedly for closing costs. The couple made only one loan payment before defaulting, and County Bank filed for foreclosure.
In response, the Shallas sued. They alleged that Goerdt had misled them and that both Peoples Bank and County Bank bore some responsibility for what happened. Their claims included negligence, fraudulent misrepresentation, conversion, and aiding and abetting.
While the jury later found Goerdt liable for converting $5,800 from the Shallas’ account, most of their claims were dismissed before reaching trial. Goerdt, meanwhile, was indicted in 2019 on 16 federal charges - including bank fraud and identity theft - and ultimately pleaded guilty to 15 counts.
But the core legal issue in the civil case wasn’t the criminal charges. It was whether Goerdt’s alleged oral promises to arrange financing - made while he was at Peoples Bank - could be enforced in court. The Iowa Supreme Court said no.
Relying on Iowa Code § 535.17, the state’s credit agreement statute of frauds, the justices held that credit agreements must be in writing to be legally enforceable - including all material terms. That law, they said, doesn’t just block breach of contract claims; it also prevents plaintiffs from rebranding those claims as fraud or negligence to get around the writing requirement.
In other words, a handshake deal isn’t going to fly in court when it comes to mortgage financing.
The high court affirmed the $2.3 million foreclosure judgment against the Shallas, which included the unpaid loan, interest, attorney fees, and costs. The court also upheld the dismissal of their claims against Peoples Bank and denied any attempt to revive them under tort law.
The May 9 decision closes a significant chapter in a case that began with a troubled mortgage, spiraled into allegations of financial misconduct, and ended with a clear directive to both borrowers and lenders: unless it's in writing, it's not enforceable.
For mortgage professionals, the ruling is a sharp reminder of the importance of formal, documented agreements. It also reinforces statutory protections for lenders facing claims based on unwritten promises - even when those promises are made by bank officers who later turn out to be acting in bad faith.
