                IN THE SUPREME COURT OF IOWA
                              No. 08–1106

                           Filed May 14, 2010


BANK OF THE WEST, Successor-In-Interest
to Commercial Federal Bank,

      Appellant,

vs.

PHYLLIS J. KLINE and CHRISTINE WALTERS,

      Appellees.


      Appeal from the Iowa District Court for Dallas County, Dale B.

Hagen, Judge.



      A bank appeals from a district court order granting the debtors’

motions for summary judgment. AFFIRMED.



      Thomas H. Burke, John F. Fatino, and Nicholas Cooper of

Whitfield & Eddy, P.L.C., Des Moines, for appellant.


      David Swinton of Belin Lamson McCormick Zumbach Flynn, a

Professional Corporation, Des Moines, for appellee Kline.

      Jerrold Wanek of Garten & Wanek, Des Moines, for appellee

Walters.
                                     2

WIGGINS, Justice.

      In this appeal, we must decide if two debtors can use the Equal

Credit Opportunity Act (ECOA) as an affirmative defense to an action by

a creditor to collect a debt.   Because we find the debtors can use the

ECOA in that manner and there is no genuine issue of material fact as to

the creditworthiness issue raised by the creditor on appeal, we affirm the

judgment of the district court granting the debtors’ motions for summary

judgment.

      I. Background Facts and Proceedings.

      In consideration of monies loaned to Acme Land Company, L.L.C.,

Acme made, executed, and delivered a promissory note in the initial

principal sum of five million dollars with interest accruing at an initial

rate of 4.75% per annum to Commercial Federal Bank (CFB). To secure

payment on the note, on the same date, Acme made, executed, and

delivered in favor of CFB a construction mortgage that encumbered

certain real property located in Dallas County.      Additionally, John C.

Kline, Inc., Randy Walters, Inc., John C. Kline, Phyllis J. Kline, Randal L.

Walters, and Christine Walters each made, executed, and delivered to

CFB an unlimited commercial guaranty of all the obligations Acme owed

to CFB. Each guaranty obligated the guarantor for any and all of Acme’s

indebtedness to CFB.

      Thereafter,   CFB,   Commercial    Federal   Corporation    (CFC),   a

Nebraska corporation, and Bank of the West, a California banking

corporation, entered into a merger agreement. The merger caused both

CFB and CFC to merge into Bank of the West, leaving Bank of the West

as the only surviving corporation. Under the terms of the merger, Bank

of the West acquired all the assets of CFB, including the promissory
                                    3

note, construction mortgage, and unlimited commercial guaranties

executed in the Acme transaction.

      Acme failed to repay the loan and consequently was in default

pursuant to the terms of the promissory note. Bank of the West filed a

mortgage foreclosure petition without redemption and suit on guaranties

against Acme, John C. Kline, Inc., Randy Walters, Inc., John C. Kline,

Phyllis J. Kline, Randal L. Walters, and Christine Walters.      Christine

answered the petition and alleged as an affirmative defense that the

ECOA barred Bank of the West’s claims against her.          Christine also

asserted her alleged ECOA violation as a counterclaim.        Specifically,

Christine alleged that Bank of the West obtained her unlimited

commercial guaranty solely because she was the spouse of Randal

Walters and not because other parties obligated to the bank were not

sufficiently creditworthy to satisfy Acme’s obligations.   Thus, Christine

claimed Bank of the West unlawfully discriminated against her based on

her marital status in violation of the ECOA, rendering her guaranty void

and unenforceable.

      Phyllis also filed an answer to Bank of the West’s petition.

Although Phyllis did not assert an alleged ECOA violation as either an

affirmative defense or a counterclaim, she did file a cross-claim against

her ex-husband, John C. Kline, for failing to indemnify and hold her

harmless from her guaranty pursuant to the terms of their dissolution

decree.   In response to the cross-claim, John filed a counterclaim for

indemnification against Bank of the West, alleging that the bank violated

the ECOA by obtaining Phyllis’s guaranty solely because she was his

spouse. Thus, John claimed Bank of the West unlawfully discriminated

against Phyllis on the basis of her marital status in violation of the

ECOA, rendering her guaranty void and unenforceable.               Phyllis
                                    4

eventually filed an amended answer asserting the bank’s violations of the

ECOA as an affirmative defense and a counterclaim for declaratory and

equitable relief.

      In response to both Christine’s and John’s counterclaims, Bank of

the West claimed as affirmative defenses: (1) Christine, Phyllis, and John

could not raise an ECOA violation claim because they do not qualify as

“applicants” under the ECOA, and (2) the two-year statute of limitations

under the ECOA has expired barring Christine’s, Phyllis’s, and John’s

ECOA violation claims.

      The parties filed cross-motions for summary judgment.            The

district court ruled on Bank of the West’s motion for summary judgment

as well as the defendants’ cross-motions for summary judgment.         The

district court granted the bank’s motion as to defendants, Acme, Randy

Walters, Inc., John C. Kline, and Randal L. Walters and entered

judgment against them on the notes and guaranties. As to Christine and

Phyllis, the court held they both could assert the ECOA because the term

“applicant” as used in the act includes guarantors.     The court further

held the two-year statute of limitations began to run when Christine and

Phyllis signed their guaranties. Thus, the two-year statute of limitations

had run, barring Christine’s and Phyllis’s offensively asserted ECOA

counterclaims. Nevertheless, the court held Christine and Phyllis could

still assert Bank of the West’s ECOA violations as affirmative defenses.

      As a result, the district court appeared to dismiss Christine’s and

Phyllis’s ECOA counterclaims, allow Christine and Phyllis to raise the

ECOA violations as affirmative defenses, and grant the defendants’ cross-

motions for summary judgment as it pertained to Christine’s and

Phyllis’s ECOA affirmative defenses—rendering Christine’s and Phyllis’s

unlimited commercial guaranties void and unenforceable.
                                       5

      Apparently, the parties were confused as to the effect of the district

court’s summary judgment ruling. Phyllis filed a motion to amend the

court’s ruling to confirm the dismissal of Bank of the West’s petition with

regard to Christine and Phyllis.       Likewise, Bank of the West filed a

motion to enlarge or amend the district court’s ruling. In its motion, the

bank sought a clarification that the district court only ruled Christine

and Phyllis could assert the alleged ECOA violations as affirmative

defenses, but did not substantively dispose of the bank’s claims against

Christine and Phyllis as a matter of law. Additionally, the bank moved

the court to amend its ruling to reflect that there exists a question of

material fact regarding whether or not Christine’s and Phyllis’s husbands

were creditworthy at the time Christine and Phyllis executed their

guaranties.

      Meanwhile, both parties proceeded to prepare for trial. Bank of the

West filed its trial brief. Prior to the trial date, the district court ruled on

the parties’ motions for clarification of the court’s summary judgment

ruling.   The court stated that in its summary judgment ruling it

concluded there were no genuine issues of material fact as to the validity

of Christine’s and Phyllis’s ECOA affirmative defenses. Thus, the court

stated that it should have dismissed Bank of the West’s actions against

Christine and Phyllis. Consequently, the court granted Christine’s and

Phyllis’s cross-motions for summary judgment and dismissed Bank of

the West’s petition as to Christine and Phyllis. This ruling disposed of all

issues in the case, and there was no need for a trial. Bank of the West

filed a notice of appeal from the district court’s ruling dismissing its

claims against Christine and Phyllis.
                                     6

      II. Issues.

      This case presents three issues: (1) whether Christine and Phyllis

can assert an ECOA claim and/or affirmative defense, (2) whether

Christine and Phyllis can assert an ECOA violation as an affirmative

defense to void their guaranties even after the statute of limitations for

an offensive claim under the ECOA has run, and (3) whether there

remains disputed material facts as to whether Bank of the West violated

the ECOA by requiring Christine’s and Phyllis’s personal guaranties.

      III. Scope of Review.

      We review an order granting summary judgment for correction of

errors at law. Hills Bank & Trust Co. v. Converse, 772 N.W.2d 764, 771

(Iowa 2009). Summary judgment is appropriate if the moving party has

met his or her burden of showing the nonexistence of a material fact.

Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 434 (Iowa 2008). “The

nonmoving party [is] afforded every legitimate inference that can be

reasonably deduced from the evidence, and if reasonable minds can

differ on how the issue should be resolved, a fact question is generated”

and summary judgment should not be granted. Hills Bank & Trust Co.,

772 N.W.2d at 771; Sweeney v. City of Bettendorf, 762 N.W.2d 873, 877

(Iowa 2009). Thus, our review is limited to the determination of whether

a genuine issue of material fact exists and whether the district court

applied the correct law. Hills Bank & Trust Co., 772 N.W.2d at 771. If no

genuine issue of material fact exists, our decision will turn on our

construction of the ECOA. State ex rel. Claypool v. Evans, 757 N.W.2d

166, 169 (Iowa 2008). We review questions of statutory construction for

correction of errors at law. Estate of Ryan v. Heritage Trails Assocs., Inc.,

745 N.W.2d 724, 728 (Iowa 2008).
                                     7
    IV. Whether Christine and Phyllis Can Assert Violations of the
ECOA.
      Bank of the West argues the district court erred by holding
Christine and Phyllis could assert violations of the ECOA. The district

court concluded Christine and Phyllis could assert ECOA violations

because they were required to execute personal guaranties even though

there was no prior determination by CFB that their spouses were not

sufficiently creditworthy. Bank of the West claims Christine and Phyllis

cannot assert ECOA violations because they do not qualify as

“applicants” under the ECOA.

      The ECOA provides that,

             It shall be unlawful for any creditor to discriminate
      against any applicant, with respect to any aspect of a credit
      transaction . . . on the basis of race, color, religion, national
      origin, sex or marital status, or age (provided the applicant
      has the capacity to contract).

15 U.S.C. § 1691(a)(1) (2000) (emphasis added).         The ECOA defines

“applicant” as, “any person who applies to a creditor directly for an

extension, renewal, or continuation of credit, or applies to a creditor

indirectly by use of an existing credit plan for an amount exceeding a

previously established credit limit.” 15 U.S.C. § 1691a(b). Viewing this

definition of “applicant” without more, it appears Bank of the West’s

claim has merit. In this case, Acme was the only defendant that applied

to a creditor for credit.   Thus, under the ECOA definition only Acme

would qualify as an “applicant.”

      Prior to 1986, we would have agreed with the bank. See Marine

Am. State Bank of Bloomington, Ill. v. Lincoln, 433 N.W.2d 709, 713 (Iowa

1988) (holding a spouse who guaranteed a loan in 1981 was not an

applicant under the ECOA). However, the ECOA authorizes the Board of

Governors of the Federal Reserve System (Board) to enact regulations to
                                    8

carry out the purposes of the ECOA.       15 U.S.C. § 1691b(a)(1).     The

regulations promulgated by the Board are codified in Regulation B. See

12 C.F.R. §§ 202.1–.16 (2004).       In 1986, the Board amended the

definition of “applicant” under Regulation B to provide:

      Applicant means any person who requests or who has
      received an extension of credit from a creditor, and includes
      any person who is or may become contractually liable
      regarding an extension of credit. For purposes of § 202.7(d),
      the term includes guarantors, sureties, endorsers, and similar
      parties.

12 C.F.R. § 202.2(e) (emphasis added).         Originally, Regulation B’s

definition of “applicant” excluded guarantors. Douglas County Nat’l Bank

v. Pfeiff, 809 P.2d 1100, 1102 (Colo. Ct. App. 1991); Kevin A. Palmer &

Michael H. Malin, Jr., ECOA, Regulation B, and the Spousal Guaranty:

Recent Developments, 115 Banking L.J. 357, 359 (1998). The primary

purpose of the 1986 amendment was “ ‘to give guarantors and similar

parties standing to seek legal remedies when a violation occurs under

§ 202.7(d).’ ”   Pfeiff, 809 P.2d at 1103 (quoting Final Rule Revising

Regulation B, 50 Fed. Reg. 48,018, 48,020 (Nov. 20, 1985) (Official Staff

Commentary)); see also Joel D. Stafford, Consumer Protection: The Equal

Credit Opportunity Act: Guarantors as Applicants—Did the Cost of a

Violation Go Up?, 40 Okla. L. Rev. 431, 442–43 (1987) [hereinafter

“Stafford Article”] (recognizing the amendment provides regulatory

standing to a guarantor to sue for violations of Regulation B’s

cosignature rules). Consequently, for purposes of § 202.7(d), a guarantor

expressly falls within the meaning of “applicant” and therefore can assert

an ECOA violation. 12 C.F.R. § 202.2(e); see also F.D.I.C. v. Medmark,

Inc., 897 F. Supp. 511, 514 (D. Kan. 1995) (stating “[t]he term ‘applicant’

encompasses any person who is or may become contractually liable

regarding an extension of credit, including guarantors”); Pfeiff, 809 P.2d
                                           9

at 1102–03 (same); Lincoln, 433 N.W.2d at 712–13 (recognizing

Regulation B’s definition of “applicant” was amended so as to include

guarantors).

       In this case, Christine’s and Phyllis’s alleged ECOA violations arise

under Regulation B § 202.7(d) because they claim the bank illegally

obtained their spousal guaranties. See 12 C.F.R. § 202.7(d) (regulating

when a creditor may require a spouse’s signature); Official Staff

Interpretations, 12 C.F.R., Part 202, Supp. I, § 202.7(d)(6) (stating

section 202.7(d) bars a creditor from requiring the signature of a

guarantor’s spouse just as it bars a creditor from requiring the signature

of an applicant’s spouse). Thus, as guarantors, Christine and Phyllis are

“applicants” under the ECOA and can assert alleged ECOA violations

against Bank of the West.

      V. Whether Christine and Phyllis Can Assert an ECOA
Violation as an Affirmative Defense to Void Their Guaranties Even
After the Statute of Limitations for an Offensive Claim Under the
ECOA Has Run.
       A. Positions Regarding a Debtor’s Use of an Alleged Violation

of the ECOA After the Applicable Statute of Limitations Has Run.

Although Bank of the West agrees with the district court that the ECOA’s
statute of limitations bars Christine’s and Phyllis’s counterclaims, Bank

of the West argues that Christine’s and Phyllis’s ECOA affirmative

defenses are also barred under the ECOA as a matter of law. 1 Bank of


        1The ECOA has a two-year statute of limitations, which begins to run “from the

date of the occurrence of the violation.” 15 U.S.C. § 1691e(f). We have recognized that
a violation occurs, and the statute begins to run, when a creditor improperly requires a
spouse’s signature in violation of the ECOA. Lincoln, 433 N.W.2d at 712 (stating, the
ECOA’s focus “is upon the time of the discriminatory actions, not the time at which the
consequences of the action became painful”). The district court held Christine’s and
Phyllis’s ECOA counterclaims were time-barred because they executed their guaranties
on May 26, 2004, but did not assert their ECOA counterclaims until more than two
years later (i.e., August 28, 2007, for Christine and September 11, 2007, for Phyllis).
Neither Christine nor Phyllis raised this issue on appeal. Therefore, we will not address
this issue on appeal.
                                   10

the West argues that Christine and Phyllis cannot assert alleged ECOA

violations as affirmative defenses because allowing a debtor to assert a

violation as an affirmative defense is not the proper method of recovery

under the ECOA.     In dicta, we have said, “the debtor may assert the

ECOA claim in the nature of recoupment.” Lincoln, 433 N.W.2d at 712.

We have never decided or commented on whether a debtor can use an

ECOA claim as an affirmative defense.     Currently, there is a split of

authority among federal and state jurisdictions on the issue of whether a

debtor can assert an alleged ECOA violation after the statute of

limitations has run on an offensive action for damages under the ECOA.

The disagreeing camps have staked out three general positions on the

use of an alleged violation of the ECOA after the statute of limitations

has run.

      1. Position #1: A debtor can only assert an ECOA violation as a

counterclaim. A number of state and federal courts have held the only

remedy provided for an ECOA violation is an offensive action for damages

brought within two years of the violation. See 15 U.S.C. § 1691e(a), (b),

(d), (f) (providing expressly for a civil cause of action for actual and

punitive damages as well as attorney fees and costs against a creditor

who violates the ECOA).    Consequently, these courts have refused to

recognize the validity of an ECOA violation asserted as an affirmative

defense. See, e.g., F.D.I.C. v. 32 Edwardsville, Inc., 873 F. Supp. 1474,

1480 (D. Kan. 1995) (holding a plaintiff cannot assert a violation of the

ECOA as an affirmative defense); Riggs Nat’l Bank of Washington, D.C. v.

Linch, 829 F. Supp. 163, 169 (E.D. Va. 1993) (same), aff’d, 36 F.3d 370

(4th Cir. 1994); CMF Va. Land, L.P. v. Brinson, 806 F. Supp. 90, 93 (E.D.

Va. 1992) (holding that an ECOA violation is not properly asserted as an
                                    11

affirmative defense to liability and should instead take the form of a

compulsory counterclaim).

      This position rests on two grounds. First, these jurisdictions argue

the language of the ECOA does not expressly or implicitly afford relief by

way of an affirmative defense.    See, e.g., Linch, 829 F. Supp. at 169;

Brinson, 806 F. Supp. at 95–96.

      The ECOA, by its own terms, sets forth the contemplated
      remedy under the statute—a federal civil action for actual
      damages, punitive damages not to exceed $10,000,
      attorneys’ fees or injunctive relief. Nowhere does it afford
      relief by way of an affirmative defense. A counterclaim
      certainly can be premised upon a violation of the ECOA, but
      such a violation cannot be alleged to avoid basic liability on
      the underlying debt.
Brinson, 806 F. Supp. at 95.        Second, these jurisdictions conclude

neither the ECOA nor the case law supports the proposition that an

ECOA violation asserted as an affirmative defense may render an

instrument or the underlying obligation void. Diamond v. Union Bank &

Trust of Bartlesville, 776 F. Supp. 542, 544 (N.D. Okla. 1991) (stating

“there is no authority, in statutory language or case law, for the

proposition that a violation of the ECOA renders an instrument void”);

accord 32 Edwardsville, Inc., 873 F. Supp. at 1480 (finding section

1691e(c) of the ECOA does not grant courts the power to invalidate

underlying   obligations);   Brinson,    806   F.   Supp.   at   95   (stating

“[i]nvalidation of the debt itself is a remedy too drastic for the Court to

implement simply by reading between the lines of the ECOA”).           Thus,

these courts are wary of granting a sweeping new affirmative defense

remedy under the ECOA that a debtor may use to invalidate the entire

underlying debt when no language providing for such a defense is

expressly or implicitly contained within the ECOA. See Ami L. Dilorenzo,

Regulation B: How Lenders Can Fight Back Against the Affirmative Use of
                                    12

Regulation B, 8 U. Miami Bus. L. Rev. 215, 220 (2000) [hereinafter

“Dilorenzo Article”] (stating the rationale behind not allowing Regulation B

as an affirmative defense). As a result, while these courts recognize a

plaintiff can offensively assert an ECOA violation as a civil action to

recover damages against a creditor, they refuse to recognize an ECOA

violation asserted as an affirmative defense.

      2.   Position #2:   A debtor can assert an ECOA violation as an

affirmative defense in the nature of recoupment. Many federal and state

jurisdictions have allowed a plaintiff to assert an ECOA violation as an

affirmative defense, even after the two-year statute of limitations has run

for an offensive ECOA claim, by way of recoupment. See, e.g., Bolduc v.

Beal Bank, SSB, 167 F.3d 667, 672 (1st Cir. 1999) (holding the

recoupment doctrine could allow a spouse to assert an ECOA affirmative

defense against a creditor even after the statute of limitations had run);

Silverman v. Eastrich Multiple Investor Fund, L.P., 51 F.3d 28, 32 (3d Cir.

1995) (reasoning, at least in part, that a plaintiff could proceed with a

defensive ECOA claim after the statutory period had run, by way of the

right of recoupment); Integra Bank/Pittsburgh v. Freeman, 839 F. Supp.

326, 330 n.6 (E.D. Pa. 1993) (recognizing an action by way of

recoupment, which essentially functions as a defense, will lie where a

party possesses an otherwise time-barred ECOA claim); In re Remington,

19 B.R. 718, 721 (Bankr. D. Colo. 1982) (holding, even though an

affirmative action for damages is barred, the debtor may assert an ECOA

violation defensively in the nature of recoupment); PNC Bank, Del. v.

Turner, 659 A.2d 222, 225 (Del. Super. Ct. 1995) (“Although an

affirmative action is time barred under the ECOA . . . , the defendant

may still assert recoupment as an affirmative defense.”); Machias Sav.

Bank v. Ramsdell, 689 A.2d 595, 599 (Me. 1997) (same); Mundaca Inv.
                                    13

Corp. v. Emery, 674 A.2d 923, 925 (Me. 1996) (same); F.D.I.C. v. Notis,

602 A.2d 1164, 1166 (Me. 1992) (same).

      The doctrine of recoupment “allows a defendant to ‘defend’ against

a claim by asserting—up to the amount of the claim—the defendant’s

own claim against the plaintiff growing out of the same transaction.”

Bolduc, 167 F.3d at 672; see also Emery, 674 A.2d at 925 n.4 (“ ‘[A]

‘recoupment’ is a reduction of part of the plaintiff’s damages because of a

right in the defendant arising out of the same transaction.’ ” (quoting

Inniss v. Methot Buick-Opel, Inc., 506 A.2d 212, 217 (Me. 1986)));

Dilorenzo Article, 8 U. Miami Bus. L. Rev. at 224–25 (providing a

definition of recoupment); Richard J. Wirth & Jonathan B. Alter, Spousal

Defenses Based in Equal Credit Laws, 99 Com. L.J. 93, 100–01 (1994)

(same). Additionally, the defense of recoupment survives as long as the

cause of action upon the claim continues to exist. In re Remington, 19

B.R. at 720. This means, “a recoupment defense is not barred by the

statute of limitations so long as the main action itself is timely.” Turner,

659 A.2d at 225 (citing United States v. Dalm, 494 U.S. 596, 605, 110

S. Ct. 1361, 1366–67, 108 L. Ed. 2d 548, 559 (1990)). “Stated in another

way, the defense of recoupment may be asserted even though the claim

as an independent cause of action is barred by [the statute of]

limitations.”   In re Remington, 19 B.R. at 720.    The jurisdictions that

favor this approach treat an ECOA violation asserted as an affirmative

defense after the statute of limitations has run as being in the nature of

a recoupment claim. See, e.g., Notis, 602 A.2d at 1165–66 (finding that

defendant had sufficiently pled an ECOA affirmative defense in the

nature of recoupment even though the specific word “recoupment” was

not used). Thus, these jurisdictions reason the running of the statute of
                                    14

limitations does not bar the assertion of an ECOA violation as an

affirmative defense.

      3.      Position #3: A debtor can assert an ECOA violation as an

affirmative defense based on the defense of illegality.    Finally, several

jurisdictions have allowed a plaintiff to assert an ECOA violation as an

affirmative defense, even after the two-year statute of limitations has run

for an offensive ECOA claim, based on the principle that a contract in

violation of a statute is void and unenforceable.       See, e.g., Integra

Bank/Pittsburgh, 839 F. Supp. at 329 (stating “a creditor may not claim

legal reliance on a signature that was illegally required in the first

instance”); Boone Nat’l Sav. & Loan Ass’n, F.A. v. Crouch, 47 S.W.3d 371,

374–76 (Mo. 2001) (citing broad equitable principles when permitting

defendant to assert an ECOA affirmative defense after the statutory

period had run); Eure v. Jefferson Nat’l Bank, 448 S.E.2d 417, 421 (Va.

1994) (holding defendant was entitled to assert an ECOA violation as an

affirmative defense to avoid only her liability because to do otherwise

would be to enforce conduct that is forbidden by the ECOA).

      The basis for this position is that the guaranty is a contract

growing out of an illegal act and is contrary to public policy under both

the ECOA and state law. Eure, 448 S.E.2d at 419–20. In reaching this

conclusion, the Virginia Supreme Court relied on the Supreme Court

opinion in Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 102 S. Ct. 851, 70

L. Ed. 2d 833 (1982), for the proposition that a violation of an act of

Congress may be used defensively to avoid the obligation of a contract.

Id. at 420.

      Kaiser Steel Corp. involved purported violations of the Sherman Act

and the National Labor Relations Act. Kaiser Steel Corp., 455 U.S. at 78,

102 S. Ct. at 856–57, 70 L. Ed. 2d at 840. In Kaiser Steel Corp., the
                                     15

Supreme Court recognized that, “ ‘[t]he authorities from the earliest time

to the present unanimously hold that no court will lend its assistance in

any way towards carrying out the terms of an illegal contract.’ ” Id. at 77,

102 S. Ct. at 856, 70 L. Ed. 2d at 839 (quoting McMullen v. Hoffman, 174

U.S. 639, 654, 19 S. Ct. 839, 845, 43 L. Ed. 1117, 1123 (1899)).

Moreover, the court stated that the defense of illegality “should be

entertained in those circumstances where its rejection would be to

enforce conduct that the antitrust laws forbid.” Id. at 81–82, 102 S. Ct.

at 858–59, 70 L. Ed. 2d at 842. The Virginia Supreme Court in Eure also

recognized that the Supreme Court in Kaiser Steel Corp. allowed the

defense of illegality even though the Sherman Act and the NLRA already

provided specific remedies for their violation and neither act contained

explicit provisions permitting defensive use of a violation to avoid liability

under a contract. Eure, 448 S.E.2d at 420. In allowing the defense of

illegality in Kaiser Steel Corp., the Supreme Court stated:

      Refusing to enforce a promise that is illegal under the
      antitrust or labor laws is not providing an additional remedy
      contrary to the will of Congress. A defendant proffering the
      defense seeks only to be relieved of an illegal obligation and
      does not ask any affirmative remedy based on the antitrust
      or labor laws. “[A]nyone sued upon a contract may set up as
      a defense that it is a violation of the act of Congress, and, if
      found to be so, that fact will constitute a good defense to the
      action.”
Kaiser Steel Corp., 455 U.S. at 81 n.7, 102 S. Ct. at 858 n.7, 70 L. Ed. 2d

at 842 n.7 (quoting E. Bement & Sons v. Nat’l Harrow Co., 186 U.S. 70,

88, 22 S. Ct. 747, 754, 46 L. Ed. 1058, 1067 (1902)).           The Virginia

Supreme Court concluded that this statement applied with equal force to

a wife’s use of an ECOA affirmative defense to avoid her liability under

the guaranty she executed. Eure, 448 S.E.2d at 421.
                                      16

       B.   Analysis.    The district court decided this case by allowing

Christine and Phyllis to assert Bank of the West’s ECOA violations as

affirmative defenses.     The basis for allowing Christine and Phyllis to

assert the bank’s ECOA violations as affirmative defenses is that their

unlimited personal guaranties arose out of an illegal act and enforcement

would be contrary to public policy. Eure, 448 S.E.2d at 419–20.

       It   is   well-established   Iowa   law   that   contracts   made   in

contravention of a statute are void, and Iowa courts will not enforce such

contracts. Pike v. King, 16 Iowa 49, 52 (1864). It is also well-established

that this rule applies only to the parties to the illegality or those “so

closely associated or connected therewith as to be held in law to be in

pari delicto.” George Birrell, Inc. v. Fid. & Cas. Co. of N.Y., 193 Iowa 860,

874, 188 N.W. 26, 32 (1922). A more recent application of these rules

can be found in Milholin v. Vorhies, 320 N.W.2d 552 (Iowa 1982). There,

a broker sought to enforce an oral listing agreement.          Milholin, 320

N.W.2d at 553. We first determined that a rule promulgated by the Iowa

Real Estate Commission requiring all listing agreements to be in writing

was valid and had the force and effect of a statute. Id. at 553–54. We

also noted the purpose of the rule was to protect the public by

establishing fair dealings between parties, standardizing the procedure

and practices in the real estate business, and preventing fraud. Id. at

554.    Accordingly, in Milholin, we held an oral listing agreement is

unenforceable upon proper objection, and we refused to enforce the oral

listing agreement at issue in the case. Id. at 554–55.

       We believe the same analysis applies to a violation of the ECOA. In

the early 1970s, discriminatory credit practices were prevalent across the

nation. The largest problem centered on the inability of women to obtain

credit on the same basis as men. Stafford Article, 40 Okla. L. Rev. at
                                       17

431.    As a result, the ECOA was enacted in 1974 in response to

testimony      in   the   House   of   Representatives,    “which    described

discrimination against credit applicants on the basis of characteristics,

such as sex or marital status, which were unrelated to creditworthiness.”

Joseph J. Ziino, Jr., A Review of the Federal Equal Credit Opportunity Act,

27 Drake L. Rev. 1, 1 (1977). Moreover, because credit discrimination

was not limited only to sex and marital status, in 1976, Congress

expanded the ECOA to create a comprehensive credit discrimination

statute.   Stafford Article, 40 Okla. L. Rev. at 432.      The gender-neutral

language of the ECOA indicates that Congress chose to protect any

applicant, regardless of gender, from discrimination by requiring that

creditors treat all credit applicants in an identical manner. Markham v.

Colonial Mortgage Serv. Co., 605 F.2d 566, 569 (D.C. Cir. 1979).

Congress gave the Board the duty to promulgate regulations to carry out

the purpose of the Act. 15 U.S.C. § 1691b(a)(1). One such regulation

provides a creditor cannot require the signature of an applicant’s spouse

or any other person if the applicant is individually creditworthy.          12

C.F.R. § 202.7(d).

       Christine and Phyllis claim the reason they were required to

guaranty Acme’s loan was solely because they were the spouses of

Randal and John, not because the other parties obligated in the

transaction were not sufficiently creditworthy. If Christine and Phyllis

were required to sign the guaranties solely because they were the

spouses of Randal and John, and are then required to pay under these

guaranties, the purpose of the act—that a creditor cannot require the

signature of an applicant’s spouse or any other person if the applicant is

individually    creditworthy—would      be   frustrated.     See    15   U.S.C.

§ 1691(a)(1); 12 C.F.R. § 202.7(d).
                                     18

      Other reasons also lead us to the conclusion that Christine and

Phyllis should be entitled to use the bank’s violations of the ECOA as

affirmative defenses.     First, the threat of courts releasing guarantors

from liability on guaranties obtained in violation of the ECOA will

strongly deter creditors’ discriminatory practices.    See Andrea Michele

Farley, The Spousal Defense—A Ploy to Escape Payment or Simple

Application of the Equal Credit Opportunity Act?, 49 Vand. L. Rev. 1287,

1306–07 (1996) (noting that creditors will continue to violate the ECOA

unless courts order remedies that command the attention of creditors

and force them to take notice of the financial consequences). Second,

equity should forbid creditors from benefiting from their discriminatory

practices in violation of the ECOA. “Congress—in enacting the ECOA—

intended that creditors not affirmatively benefit from proscribed acts of

credit discrimination.”    Integra Bank/Pittsburgh, 839 F. Supp. at 329.

Allowing creditors, especially institutions who are sophisticated in credit

transactions, to benefit by their disregard of the requirements of the

ECOA seriously undermines the Congressional intent to eliminate gender

and marital status-based credit discrimination. Id. As a result, equity

requires that:

      [A]n offending creditor should not be permitted to look for
      payment to parties who, but for the ECOA violation, would
      not have incurred personal liability on the underlying debt in
      the first instance. This rule places a creditor in no worse
      position than if it had adhered to the law when the credit
      transaction occurred. . . . [A] creditor may not claim legal
      reliance on a signature that was illegally required in the first
      instance.

Id.

      Finally, allowing a debtor to assert a violation of the ECOA as an

affirmative defense, even after the statute of limitations has run for an
                                    19

offensive ECOA claim, best protects the victims of credit discrimination.

Most debtors do not know about the provisions of the ECOA unless they

have consulted an attorney. In re Remington, 19 B.R. at 720. If courts

do not allow a debtor to use a violation of the ECOA as an affirmative

defense, a creditor may take its chances and hope the debtor does not

realize a violation has occurred until the two-year statute of limitations

has run. Id.

      Allowing Christine and Phyllis to assert violations of the ECOA as

affirmative defenses is not only consistent with our law dealing with

illegal contracts, but is also consistent with the public policy behind the

enactment of the ECOA.       If we do not allow this remedy after the

expiration of the two-year statute of limitations, lenders would be free to

violate the law if they waited two years before trying to enforce a credit

agreement.     Congress did not intend for lenders to avoid the

consequences of the ECOA by the mere passage of time. Accordingly, we

agree with the jurisdictions that allow a creditor to use a violation of the

ECOA as an affirmative defense after the two-year statute of limitations

has run. See, e.g., Medmark, Inc., 897 F. Supp. at 514–15; Eure, 448

S.E.2d at 421.    This position is consistent with Iowa law.     Thus, the

district court was correct when it allowed Christine and Phyllis to assert

violations of the ECOA as affirmative defenses to void the obligations

made in contravention of the ECOA.

      VI. Whether There Remains Disputed Material Facts as to
Whether Bank of the West Violated the ECOA by Requiring
Christine’s and Phyllis’s Personal Guaranties.

      In their motions for summary judgment, Christine and Phyllis

claim the reason they were required to guarantee Acme’s loan was solely

that they were the spouses of Randal and John, not because the other
                                   20

parties obligated in the transaction were not sufficiently creditworthy.

Randal and John filed affidavits stating the facts contained in the

statement of undisputed facts were true and correct.           The facts

supported by affidavits state the parties to this loan transaction, other

than Christine and Phyllis, were qualified under any reasonable standard

of creditworthiness for the amount and terms of credit requested. The

facts supported by affidavits also state the only reason the bank sought

the signatures of Christine and Phyllis was solely because they were the

spouses of Randal and John respectively. Additionally, in an answer to

an interrogatory attached to the bank’s motion for summary judgment,

Randal and John stated that a representative of the bank told Randal, at

the time the bank requested his spouse’s guaranty, that the bank

requested the guaranty solely because they were married and that her

assets were not necessary to secure the loan.          Finally, the facts

supported by the affidavits state the loan officer who arranged the

transaction told Randal and John that it was the bank’s policy to require

the signatures of spouses of the principal shareholders of a corporation

on the loan documents.

      In response to the motion, the bank filed a resistance.       In its

resistance, the bank claimed the issue of whether the lender violated the

ECOA is a question of law. The first question of law the court had to

answer was whether Christine and Phyllis were applicants under the

ECOA.    The second question of law the court needed to decide was

whether the statute of limitations precluded Christine and Phyllis from

asserting ECOA violations.    The bank did not file any pleadings or

affidavits concerning the issue of whether Acme and/or Christine’s and

Phyllis’s spouses were not sufficiently creditworthy so as to entitle the

bank to obtain Christine’s and Phyllis’s unlimited personal guaranties.
                                     21

        The district court answered the legal questions raised by the bank

by ruling Christine and Phyllis can assert ECOA violations against the

Bank.     The court also held that although the statute of limitations

precluded an offensive action for damages under the ECOA, Christine

and Phyllis could use violations of the act as affirmative defenses. The

court then relied on the affidavits, determined there were no genuine

issues of material fact as to why the bank required the guaranties, and

found the bank required the guaranties in violation of the ECOA.         We

agree with the district court that at the time it entered its ruling on the

motions for summary judgment, the affidavits showed no genuine issue

of material fact existed as to the bank requiring Christine and Phyllis to

guarantee Acme’s loan solely because they were the spouses of Randal

and John, not because the other parties obligated in the transaction were

not sufficiently creditworthy.

        After the court filed its ruling, the parties were unclear as to

whether this ruling ended the litigation against Christine and Phyllis.

Both parties filed motions to enlarge and amend the ruling. The bank

also filed a trial brief, raising the creditworthy issue for the first time.

The bank did not file any affidavits supporting its creditworthy argument.

The court amended its ruling, making it clear that it granted Christine’s

and Phyllis’s motions for summary judgment and dismissed the bank’s

actions against them.

        On appeal, the bank alleges a genuine issue of material fact existed

as to the creditworthy issue. The flaw in the bank’s argument is that it

never raised the creditworthy issue in any resistance to the motions for

summary judgment or filed any affidavits disputing the facts contained

in the affidavits filed on behalf of Christine and Phyllis prior to the court

entering its original ruling on the motions for summary judgment.
                                     22

Although the bank did raise the creditworthy issue in its trial brief, the

bank filed its trial brief after the court took the motions for summary

judgment under advisement and filed its original ruling. Moreover, the

bank never presented any affidavits showing a genuine issue of material

fact exists as to the issue of creditworthiness in connection with its trial

brief.
         Our rules of civil procedure require that when a motion for
summary judgment is filed and supported by affidavits, the resisting
party “may not rest upon the mere allegations or denials in the
pleadings, but the response, by affidavits or as otherwise provided in this
rule, must set forth specific facts showing that there is a genuine issue
for trial.” Iowa R. Civ. P. 1.981(5). If the resisting party chooses to file
affidavits supporting his or her resistance, the party must file the
affidavits with the resistance. Iowa R. Civ. P. 1.981(3). The bank never
complied with these rules. Instead, the bank sought to rest on its claims
that the application of the ECOA was purely a legal question. To resist
Christine’s and Phyllis’s motions for summary judgment on the issue of
creditworthiness, the bank was required to set forth specific evidentiary
facts showing the existence of a genuine issue of material fact. Bauer v.
Stern Fin. Co., 169 N.W.2d 850, 853 (Iowa 1969).        It failed to do so.
Therefore, we affirm the district court’s judgment granting Christine’s
and Phyllis’s motions for summary judgment.
         VII. Disposition.
         We affirm the judgment of the district court granting Christine’s
and Phyllis’s motions for summary judgment because they were entitled
to assert violations of the ECOA as affirmative defenses and no genuine
issue of material fact exists as to the creditworthiness issue raised by
Bank of the West on appeal.
         AFFIRMED.
