              IN THE SUPREME COURT OF IOWA
                           No. 37 / 05-0859

                       Filed February 22, 2008

TOBIE ANDERSON,

      Appellant,

vs.

NEXTEL PARTNERS, INC.,

      Appellee.


      Appeal from the Iowa District Court for Polk County, Douglas F.

Staskal, Judge.



      Consumer appeals district court ruling that the Iowa Consumer

Credit Code did not apply to cellular service agreement. AFFIRMED.



      Ray Johnson of Johnson Law Firm, West Des Moines, for appellant.



      Mark McCormick and Michael R. Reck of Belin Lamson McCormick

Zumbach Flynn, P.C., Des Moines, for appellee.
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HECHT, Justice.

       A consumer lost her cellular telephone and cancelled the contract

with the company that provided her phone service. When the provider sued

the customer to collect early termination fees, the customer claimed the

collection action violated the Iowa Consumer Credit Code (ICCC).                    The

district court concluded the customer’s subscriber agreement did not result

in an extension of credit under the ICCC. We agree, and therefore affirm

the district court’s ruling.
       I.     Background Facts and Proceedings.

       In December 2002, Tobie Anderson purchased two cell phones from

and entered into a cell phone subscriber agreement with Nextel Partners,

Inc. Although the agreement established a one-year term, the agreement

permitted the parties to terminate the agreement during that term.1

Anderson initialed a “new customer checklist” affirming that she had

received from a Nextel representative an explanation of “early termination

penalties,” and acknowledging her understanding that she would be liable

to pay a cancellation fee of two hundred dollars for each phone upon

termination of the agreement prior to the expiration of the one-year term.

       Although Anderson paid for the two phones when she signed the

contract, the agreement provided that “[i]f the parties have agreed that

payments are to be made in installments, or on credit as indicated on the

front of this Agreement, Customer shall be responsible for paying amounts

due as agreed to in this Agreement.” There is no indication on the front of

the service agreement that the parties agreed Anderson would make

monthly payments in installments or on credit. The agreement also noted it

was made expressly “contingent upon [Nextel’s] approval of Customer’s

       1Termination of the agreement could be accomplished “with thirty (30) days advance

written notice to the other party.”
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credit application,” and disclosed that Nextel would rely upon the

information in the subscriber agreement “in making a decision to extend

credit with regard to [s]ervices.”

       Anderson thereafter received and paid each month a bill consisting of

Nextel’s minimum access fee and additional charges when her use of the

phone exceeded the time allowed under the service plan she had purchased.

In July 2003, Anderson lost one of the cell phones subject to the subscriber

agreement, and notified Nextel of her decision to cancel the contract. She
received a bill from Nextel for $532.04, including cancellation fees.

       Anderson refused to pay the bill, claiming a Nextel sales agent had

told her at the time of sale that she could be held responsible for only four

months of a cellular service contract under Iowa law.2 Noting that she had

paid Nextel’s bills for nine months, Anderson objected to the cancellation

charges. Anderson further claimed the Nextel agent showed her at the time

of sale what he represented was a copy of an e-mail message from the Iowa

Attorney General’s office attesting that early termination fees are illegal.

       Nextel turned Anderson’s account over to Lamont, Hanley &

Associates, Inc. for collection. Anderson thereafter filed a petition against

Nextel and Lamont alleging, in relevant part, the cancellation fees are illegal

under the Iowa Consumer Credit Code, Iowa Code chapter 537 (2002), and

the Iowa Debt Collection Practices Act (IDCPA), Iowa Code section

537.7103.3

       2Anderson produced affidavits executed by other former customers who alleged they

had relied on Nextel’s agents’ representations that early termination fees are illegal and
unenforceable in Iowa.

       3Anderson’s   petition also alleges that Nextel fraudulently misrepresented the terms
and conditions of her service agreement and that the debt collection agency’s attempts to
collect her cell phone cancellation fees violated the IDCPA. Nextel has not cross-appealed
to assert the district court erred in denying its motion for summary judgment on the
fraudulent misrepresentation claim, and the parties have reached a settlement on that
matter. Anderson has also settled her claim against Lamont.
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      Nextel filed a motion for summary judgment asserting the ICCC does

not apply to the transaction in this case because no debt was deferred

under the agreement, no services were provided by Nextel in installments,

no debt payable by Anderson in installments was created under the

agreement, and no finance charge was made by Nextel. The district court

granted Nextel’s motion, holding the agreement signed by Anderson is not

subject to the ICCC because it neither resulted in an extension of credit, nor

created a debt payable in installments. Anderson has appealed.
      II.    Scope of Review.

      We review rulings on motions for summary judgment for correction of

errors at law. Otterberg v. Farm Bureau Mut. Ins. Co., 696 N.W.2d 24, 27

(Iowa 2005). A motion for summary judgment should be granted when

there is no genuine issue of material fact for trial, and the movant is entitled

to judgment as a matter of law. Iowa R. Civ. P. 1.981(3). In ascertaining

whether there is a genuine issue of material fact, we review the record in the

light most favorable to the non-moving party. Schoff v. Combined Ins. Co.,

604 N.W.2d 43, 45 (Iowa 1999).

      III.   Discussion.

      Anderson contends the district court erred in holding the contract did

not constitute an extension of credit to Anderson and that the “debt”

incurred by Anderson was not payable in installments. We conclude the

district court correctly determined the ICCC does not apply to the cellular

service agreement in this case.4




      4Because  we conclude the ICCC does not apply, we do not address Anderson’s
IDCPA claim or Nextel’s argument that the ICCC is preempted by federal law, as both
arguments are predicated on the applicability of the ICCC to the transaction between
Anderson and Nextel.
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       Anderson alleges Nextel’s charge of cancellation fees violates Iowa

Code sections 537.3310 and 537.3402 which are part of the ICCC. Section

537.3310 permits consumers, in certain circumstances, to cancel

obligations undertaken in consumer credit transactions that have not yet

been performed by a creditor, and places limitations on the charges

recoverable by the creditor. Section 537.3402 limits a creditor’s ability to

assess charges for default by a consumer in a consumer credit transaction.

A default charge in excess of the creditor’s “reasonable expenses incurred in
realizing on a security interest” is unenforceable. Iowa Code § 537.3402.

       Sections 537.3310 and 537.3402 apply only to a “consumer credit

transaction,” which is defined as “a consumer credit sale or consumer loan,

or a refinancing or consolidation thereof, or a consumer lease, or a

consumer rental purchase agreement.”                  Iowa Code § 537.1301(11).5

Anderson contends the subscriber agreement qualifies as a “consumer

credit transaction” because it is a “consumer credit sale.”
       [A] consumer credit sale is a sale of . . . services . . . in which
       all of the following are applicable:
       (1)     Credit is granted either pursuant to a seller credit card
               or by a seller who regularly engages as a seller in credit
               transactions of the same kind.
       (2)     The buyer is a person other than an organization.
       (3)     The goods, services, or interest in land are purchased
               primarily for a personal, family or household purpose.
       (4)     Either the debt is payable in installments or a finance
               charge is made.
       (5)     With respect to a sale of goods or services, the amount
               financed does not exceed twenty-five thousand dollars.


       5Iowa   Code section 537.1301 was amended in 2005, adding a new subsection (3),
and renumbering the succeeding subsections accordingly. 2005 Iowa Acts ch. 44, § 1
(codified at Iowa Code § 537.1307(3) (2005)). Thus, under the 2007 version of the Iowa
Code the definition of “consumer credit transaction” is located at section 537.1301(12), and
the definition of “consumer credit sale” is located at section 537.1301(13).
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Iowa Code § 537.1301(12)(a).6 The dispute in this case centers entirely on

whether Nextel extended “credit” to Anderson, and, if so, whether

Anderson’s debt was “payable in installments.”7

       As the term is used in section 537.1301(12)(a)(1), “credit” is “the right

granted by a person extending credit to a person to defer payment of debt,

to incur debt and defer its payment, or to purchase property or services and

defer payment therefor.” Iowa Code § 537.1301(15). Anderson contends

the cellular service agreement constitutes an extension of credit because

(1) the contract states Nextel would rely on a credit check and

determination of creditworthiness “in making a decision to extend credit

with regard to services” and (2) she was obligated to pay for an entire year of

service fees to be paid monthly. We find neither argument persuasive.

       A transaction is only a “credit” transaction if it falls within the

definition of that term in Iowa Code section 537.1301(12)(a)(1). Neither the

fact that the contract refers to “credit” nor the performance of a credit check

transforms an otherwise non-credit transaction into a credit transaction.8

Although parties may expressly contract to adopt the protections of the

ICCC, see First Northwestern National Bank, Denison v. Crouch, 287 N.W.2d

151, 153 (Iowa 1980) (holding the ICCC applied to a note which provided

that it was “subject to the provisions of the Iowa Consumer Credit Code

applying to consumer loans” even though the transaction did not satisfy the

       6Iowa   Code section 537.1301(12)(b) contains two additional limitations on the
definition of consumer credit sale, neither of which is relevant in this case.

       7Anderson  does not contend the cancellation fee is a finance charge. See Iowa Code
§ 537.1301(12)(a)(4), (19).

       8The  mere act of checking a consumer’s credit does not indicate a party’s intention
to extend credit to that consumer. Indeed, there are various commercially valid reasons a
party to a noncredit transaction may wish to check the creditworthiness of the other party,
including determining the likelihood that the other party will fulfill its obligations under the
proposed contract.
                                      7

statutory definition of a “consumer loan”), a mere reference to “credit” in the

contract is insufficient to do so.

      We conclude the service and payment arrangement established in

Nextel’s subscriber agreement does not fit within the statutory definition of

a “credit” transaction. The agreement does not, as Anderson contends,

obligate Nextel’s customer to pay for an entire year of service fees in

monthly installments. Instead, the agreement expressly allows both parties

the option to cancel the agreement before the end of the term under
specified conditions. In the event Anderson exercised her option to cancel,

she was not obligated for the full year “term,” but only for services already

provided plus the early cancellation fee. Because there is no “sum charged

which [was] due and owing” for one year’s service at the outset of the

contract, Anderson was not indebted for the cost of service for twelve

months when the contract was executed. State ex rel. Miller v. Nat’l Farmers

Org., 278 N.W.2d 905, 906 (Iowa 1979). The agreement did not allow

Anderson to defer payment of any monthly invoice for services provided by

Nextel. See id. (no credit transaction resulted where membership dues were

payable at the time of application for membership and annually thereafter).

As Anderson was obligated to pay charges invoiced by Nextel as they were

billed each month, the agreement did not constitute an extension of “credit”

for the one-year term. Cf. Laramore v. Ritchie Realty Mgmt. Co., 397 F.3d

544, 547 (7th Cir. 2005) (concluding a residential lease for a one-year term

and requiring monthly payments did not defer a debt); Riethman v. Berry,

287 F.3d 274, 277–78 (3d Cir. 2002) (concluding lawyers who did not

require up-front payment nonetheless did not “give their clients a unilateral

right to defer payments”); Shaumyan v. Sidetex Co., 900 F.2d 16, 18 (2d Cir.

1990) (concluding a home improvement contract providing for progress
                                      8

payments did not defer debt); Kuhfeldt v. Liberty Mut. Ins. Co., 833 F. Supp.

632, 635–36 (E.D. Mich. 1993) (concluding an insurance policy providing

for one year’s coverage and not requiring plaintiffs to continue to pay

monthly premiums was not a credit transaction); Liberty Leasing Co. v.

Machamer, 6 F. Supp. 2d 714, 717–19 (S.D. Ohio 1998) (concluding

consumer leases do not defer debt because they are payments for

contemporaneous use).
      The district court correctly concluded the subscriber agreement
obligated Nextel to provide month-to-month service and required Anderson
to pay Nextel’s invoices for such service when billed each month. Under
this month-to-month arrangement, Anderson can at best argue she
incurred “debt” for thirty days’ service at the beginning of each month, as
the contract required thirty days’ notice for cancellation. Even if we assume
this payment structure constituted an extension of some form of “credit” for
each month, the service agreement would still not meet the statutory
requirements for a consumer credit sale because the “debt” incurred for
each month was not payable in installments, but was due and payable
upon the customer’s receipt of the monthly invoice.              Iowa Code
§ 537.1301(12)(a)(4); Williams v. AT & T Wireless Servs., Inc., 5 F. Supp. 2d
1142, 1145 (W.D. Wash. 1998) (noting that under a monthly cellular
services contract, “once the subscriber is billed for services he has used, he
cannot defer payment”).
      IV.   Conclusion.
      We conclude Nextel’s subscriber agreement did not constitute a
consumer credit sale, and therefore the provisions of the Iowa Consumer
Credit Code do not apply. The district court’s summary judgment ruling is
affirmed.
      AFFIRMED.
