Condon Auto Sales & Service, Inc. v. Crick

• Citation: 604 N.W.2d 587
• Decision Date: 22 December 1999
• Docket Number: No. 97-2229.,97-2229.
• Parties: CONDON AUTO SALES & SERVICE, INC., Condon Ford, Inc., and Condon Leasing Co., Appellees, v. William CRICK a/k/a Bill Crick, Appellant, Wisner's Auto World, Defendant/Cross-Appellee. William Crick a/k/a Bill Crick, Counterclaimant/Third-Party Plaintiff, v. Condon Auto Sales & Service, Inc., Condon Ford, Inc., and Condon Leasing Co., Third-Party Defendants.
• Court: United States State Supreme Court of Iowa

604 N.W.2d 587

CONDON AUTO SALES & SERVICE, INC., Condon Ford, Inc., and Condon Leasing Co., Appellees, v. William CRICK a/k/a Bill Crick, Appellant, Wisner's Auto World, Defendant/Cross-Appellee.

William Crick a/k/a Bill Crick, Counterclaimant/Third-Party Plaintiff, v. Condon Auto Sales & Service, Inc., Condon Ford, Inc., and Condon Leasing Co., Third-Party Defendants.

No. 97-2229.

Supreme Court of Iowa.

December 22, 1999.

As Amended on Denial of Rehearing February 4, 2000.

Rehearing Denied March 13, 2000.¹

Steven R. Jensen of Crary, Huff, Inkster, Hecht & Sheehan, P.C., Sioux City, for appellant and cross-appellee.

David L. Reinschmidt of Munger & Reinschmidt, Sioux City, for appellees.

Considered by CARTER, P.J., and LAVORATO, SNELL, CADY, and SCHULTZ,² JJ.

CADY, Justice.

This is an appeal and cross-appeal from a judgment entered by the district court following jury trial in a dispute between an employer and employee involving multiple claims, counterclaims, and a cross-claim. On our review, we affirm in part, reverse in part, and remand.

I. Background Facts and Proceedings.

Condon Leasing Company is a closely-held family corporation in Sioux City. It is owned by seven members of the Condon family, and is the parent corporation of two other corporations, Condon Auto Sales & Service, Inc. and Condon Ford, Inc.³

Condon Auto is an automobile dealership in Sioux City which sells Buick, Honda, and Isuzu vehicles. Condon Ford is an automobile dealership in Moville which sells Ford vehicles. Steve Condon is the president of Condon Ford, general manager of Condon Auto, and president of Condon Leasing. Mark Condon is the vice president of Condon Ford, president of Condon Auto, and general sales manager of both Condon Auto and Condon Ford.

Bill Crick was hired as the used car sales manager for Condon Auto in March 1995. Crick had previously worked for other car dealerships in Sioux City, including Wisner's Auto World, Inc., and was employed by a dealership in Kentucky just prior to his employment with Condon Auto.

Crick was paid a salary based upon a percentage of the total profit of the dealership, but received a monthly draw of $8500. Profits were then calculated quarterly and compared with his monthly draws. The written employment contract provided:

On April 15, July 15, Oct. 15, and Jan. 15 the quarterly earnings less draw will be paid. In the unlikely event that the draws for a given quarter exceed earnings, then the deficit will be rolled to the following quarter.

The "unlikely event" described in the employment contract was the norm while Crick was employed at Condon Auto. The business profits were insufficient to support the $8500 monthly draws. On four occasions, Steve Condon mentioned the deficit to Crick and suggested a portion of his monthly draw be applied to pay the deficit. Crick was also made aware of the growing deficit from Kevin Welte, the Chief Financial Officer of the Condon companies, following three separate quarterly financial reports. Crick assured Steve Condon that profits would increase and there was no need to reduce his draw.

In September 1995, Crick transferred to Condon Ford in Moville. Crick became the sales manager at the dealership. This was done at the request of Steve Condon. At the time Crick left Condon Auto, he had accumulated a deficit of $14,869.64 in unearned draws.

At Condon Ford, Crick was paid a straight salary of $8500 per month, which was to be replaced with a commission plan at some point in the future. Like the prior agreement, there is no specified length of employment.

On March 20, 1996, Crick abruptly left Condon Ford and began working for Wisner's as the general sales manager. At the time, Crick was owed salary in the amount of $5525, constituting pay for one full pay period and a portion of a second pay period. Condon Ford withheld this money to offset the profit-draw deficit Crick accumulated while he was employed at Condon Auto.

While working for Condon Ford, Crick was in charge of purchasing used cars at dealer auctions for resale. He attended numerous auctions. It was common for sellers at the auctions to offer incentives to induce buyers to purchase certain vehicles. One seller, Alamo Rental Cars, offered buyers either $100 cash or forty-five days free financing for each car purchased from them. On two separate occasions, Crick accepted cash for purchasing cars from Alamo. On the first occasion, he received $600 for purchasing six cars. On the second occasion, he accepted $100 for purchasing one car. Crick did not turn this money over to Condon Ford.

In the final months before Crick left Condon Ford for Wisner's he began working on several outside businesses. He was involved in selling long distance service through Excel Telecommunications, selling radio advertisements to other car dealerships around the country, and was preparing to start a management company for local car dealerships. Additionally, Crick had frequent conversations during working hours with Nick Stamoulis, a friend and former assistant manager at Condon Ford. Stamoulis was the general sales manager at Wisner's. There was evidence suggesting Crick assisted Stamoulis in selling cars during these conversations by giving him advice on financing and closing car deals. Condon Ford believed Crick neglected his duties as sales manager by pursuing these activities.

Condon Ford made a profit for each month Crick was employed as the sales manager. The dealership sold 127 cars during the last quarter of 1995, and seventy-four cars during the first quarter of 1996. It was not unusual for car sales to be slow during the first quarter of each year. However, the average profit on the sale of used cars dropped from $1359.62 during the last quarter of 1995 to $1023.92 during the first quarter of 1996. Additionally, the average loss incurred by the dealership on wholesale transfers (selling cars at the auction) rose from a loss of $57.82 per car during the last quarter of 1995 to a $251.34 per car loss in the first quarter of 1996.

Condon instituted this action against Crick. It claimed Crick's conduct in the last months of his employment not only constituted a breach of a duty of loyalty implied in his employment contract with Condon Ford, but also a breach of his duty of good faith and fair dealing, and a breach of a duty of loyalty independent of the contract. Condon further claimed Crick breached his employment contract with Condon Auto by failing to reimburse Condon Auto for the overpaid draws in the amount of $14,869.64. Condon additionally claimed Crick converted $700. Condon also initiated an action against Wisner's, claiming Wisner's intentionally interfered with its contract with Crick.

Crick filed a counterclaim against Condon Leasing and Condon Ford, claiming it withheld wages owed to him in the amount of $5525 in violation of Iowa Code chapter 91A. He also claimed he was owed an additional two percent of the profits.

Prior to trial, the district court granted summary judgment for Crick on the breach of loyalty contract claim and breach of good faith and fair dealing claim. This left Condon with the tort claims of breach of loyalty and conversion as well as the reimbursement and interference contract claims. At trial, the district court granted a directed verdict for Wisner's on the intentional interference with contract claim. It also directed a verdict for Crick on the breach of duty of loyalty claim. However, the court allowed Condon to amend its petition to reinstate the breach of contract claim based upon a breach of implied duty of loyalty.

The jury returned a verdict against Crick on the breach of loyalty contract claim in the sum of $25,000. It also awarded Condon Auto $9344.64 for overpaid draws ($14,869.64-$5525 withheld by Condon Ford). Additionally, it awarded Condon $700 for conversion, and $30,000 in punitive damages based upon the conversion. The jury found Crick's conduct was directed at Condon. The jury also found for Condon on Crick's claim for unpaid wages. The trial judge subsequently granted Crick's motion for judgment notwithstanding the verdict on the breach of loyalty contract claim. It reconsidered its prior ruling and concluded breach of loyalty was not recognized as a cause of action. It also concluded the evidence was insufficient to support any such claim and damages were too speculative. Crick appealed and Condon cross-appealed.

Crick claims the evidence was insufficient to support the verdict for conversion, breach of contract, and punitive damages. He also asserts he was entitled to judgment as a matter of law on his wage claim, and the trial court erred in instructing the jury on the wage claim.

Condon claims the trial court erred by directing a verdict on the claim for breach of loyalty and cross-claim for intentional interference with a contractual relationship. It also claims the court erred in granting a judgment notwithstanding the verdict on the contract claim for a breach of loyalty, and dismissing the tort claim of breach of loyalty.

II. Scope of Review.

Our scope of review in an action at law is for correction of errors at law. Chariton Feed & Grain, Inc. v. Harder, 369 N.W.2d 777, 782 (Iowa 1985). In reviewing rulings on a motion for judgment notwithstanding the verdict, we determine whether there was substantial evidence to generate a jury question. Lara v. Thomas, 512 N.W.2d 777, 781 (Iowa 1994). Similarly, in reviewing a directed verdict, we determine whether a jury question was generated. Fiala v. Rains, 519 N.W.2d 386, 387 (Iowa 1994). Error in jury instructions is reversible only if the error is prejudicial. Olson v. Prosoco, Inc., 522 N.W.2d 284, 287 (Iowa 1994).

Evidence is substantial to support a jury verdict if reasonable minds would find it adequate to reach the same conclusion. Shams v. Carney, 518 N.W.2d 366, 369 (Iowa 1994). In considering the sufficiency of evidence, we view the evidence in the light most...