Beeck v. Kapalis

• Decision Date: 18 February 1981
• Docket Number: No. 64637,64637
• Citation: 302 N.W.2d 90
• Parties: Jerry A. BEECK and Judy A. Beeck, Appellants, v. James J. KAPALIS, Robert C. Fasick, J. A. Gervais, The Hartford Insurance Group, and Aquaslide 'n' Dive Corporation, Appellees, v. EMPLOYERS MUTUAL CASUALTY COMPANY, Illinois-Iowa Claim Service, Inc., and Vincent E. O'Toole, Third-Party Defendants.
• Court: Iowa Supreme Court

Page 90

302 N.W.2d 90

Jerry A. BEECK and Judy A. Beeck, Appellants, v. James J. KAPALIS, Robert C. Fasick, J. A. Gervais, The Hartford Insurance Group, and Aquaslide 'n' Dive Corporation, Appellees, v. EMPLOYERS MUTUAL CASUALTY COMPANY, Illinois-Iowa Claim Service, Inc., and Vincent E. O'Toole, Third-Party Defendants.

No. 64637.

Supreme Court of Iowa.

Feb. 18, 1981.

Rehearing Denied March 13, 1981.

John A. McClintock and David L. Brown of Hansen, McClintock & Riley, Des Moines, for appellants.

Eugene Davis and David J. Grace, of Davis, Grace & Vernon, P. C., Des Moines, for appellees.

Considered by REYNOLDSON, C. J., and LeGRAND, McGIVERIN, LARSON and SCHULTZ, JJ.

McGIVERIN, Justice.

Plaintiffs Jerry and Judy Beeck appeal from trial court's grant of summary judgment for defendants. Beecks had sued them claiming damages for misrepresentations allegedly made by defendants during previous litigation. We affirm in part, reverse in part and remand.

The unfortunate set of facts of this case raise issues of first, and we hope last, impression. On July 15, 1972, Jerry Beeck was attending a social gathering sponsored by his employer at Kimberly Village in Davenport, Iowa. Beeck was seriously injured when he went down a slide into a swimming pool, struck his head and fractured his neck.

Representatives of various insurance companies investigated the accident. Kimberly Village's insurer concluded that the slide was made by Aquaslide 'n' Dive Corporation of Brownville, Texas, and notified Aquaslide of the accident. Aquaslide's insurer, The Hartford Insurance Group, then investigated. Robert C. Fasick, one of Hartford's claims representatives, based on an investigation by James J. Kapalis, reported to Hartford that the slide "was definitely manufactured by (Aquaslide)."

On October 15, 1973, Beecks filed a complaint in federal district court against Aquaslide. Jerry sought damages for personal injuries based on theories of negligence, products liability and implied warranty. His wife, Judy, claimed damages for loss of consortium. The complaint alleged that Aquaslide designed, manufactured and assembled the slide involved in the accident. After the suit was commenced, Hartford took over the defense of Aquaslide and hired a law firm to represent it. J. A. Gervais, a claims supervisor, furnished the lawyers with the investigative file.

Aquaslide answered the complaint in December 1973 and admitted that it designed and manufactured the slide. Its president, Carl Meyer, also acknowledged on June 4, 1974, in an answer to an interrogatory, that the slide was an Aquaslide. Based on this information, Beecks did not further investigate the identity of the manufacturer. Iowa's statute of limitations for personal injury actions ran on July 15, 1974. § 614.1(2), The Code.

On February 5, 1975, Meyer traveled to Iowa to give a deposition about the installation of the slide. To prepare for his deposition, he visited Kimberly Village to inspect the slide. His inspection revealed that the slide was not one designed or manufactured by his company.

After Meyer's discovery, Aquaslide sought to amend its answer to deny that it manufactured the slide. The federal district court, after an evidentiary hearing, granted leave to amend. Beeck v. Aquaslide 'n' Dive Corp., 67 F.R.D. 411 (S.D.Iowa 1975), aff'd, 562 F.2d 537 (8th Cir. 1977). Aquaslide moved for, and was granted, a separate trial solely on the issue of whether it designed, manufactured or sold the slide. After trial, the jury found that the slide was not one of Aquaslide's. The action against Aquaslide was therefore dismissed on its motion for summary judgment. The federal court's grant of leave to amend and sustention of the motion for separate trial were affirmed on appeal. Beeck v. Aquaslide 'n' Dive Corp., 562 F.2d 537 (8th Cir. 1977).

While the appeal to the Court of Appeals for the Eighth Circuit was pending, Beecks filed a petition in Iowa district court on February 4, 1977. They alleged that as a result of fraudulent, negligent and innocent misrepresentations, defendants Aquaslide, Hartford, Gervais, Fasick and Kapalis caused them to lose their valid cause of action against the real manufacturer because the statute of limitations had run. Other parties, not involved in this appeal, were brought in as third-party defendants. Iowa R.Civ.P. 34(a).

Defendants moved for summary judgment of the suit in Iowa district court. The record consisted of the petition, answer, affidavits from the defendants and from attorneys for the Beecks and Aquaslide in the federal court, and Carl Meyer's deposition and testimony from the action in federal court. The trial court sustained defendants' motion for summary judgment and dismissed Beecks' petition. Beecks appeal to us.

The following issues are presented for our consideration:

1. Did the trial court err in granting summary judgment for defendants because plaintiffs failed to allege damage since their claims against proper parties might not be barred by the statute of limitations?

2. Was there a genuine issue of material fact whether defendants made reckless misstatements, amounting to fraud, about the manufacturer of the slide when they did not have sufficient information upon which to base the statements?

3. Did the trial court err in concluding that the tort of negligent misrepresentation is not applicable to misrepresentations made by a party during litigation?

4. Does the tort of innocent misrepresentation apply in Iowa to misrepresentations made by a party during litigation?

I. Scope of review. By moving for summary judgment, defendants had the burden of showing that there was no genuine issue of material fact and they were entitled to judgment as a matter of law. Iowa R.Civ.P. 237(c); Tasco, Inc. v. Winkel, 281 N.W.2d 280, 282 (Iowa 1979). The trial court, and this court on review, must view the entire record in the light most favorable to the parties opposing the motion, the Beecks. Tasco, 281 N.W.2d at 282.

II. Claim of damages. In their motion for summary judgment, defendants claimed that they were entitled to judgment, as a matter of law, because the petition failed to properly claim loss of a remedy against the real manufacturer of the slide on which Jerry Beeck was injured. After losing in federal court, the Beecks did not sue the real manufacturer. Therefore, defendants claim that Beecks cannot show that the statute of limitations would be asserted, or would bar their claim in an action against the true manufacturer.

The defense that an action is barred by the running of the statute of limitations is personal and may be asserted or waived. First v. Byrne, 238 Iowa 712, 721, 28 N.W.2d 509, 513 (1947); Fitzgerald v. Flanagan, 155 Iowa 217, 226, 135 N.W. 738, 741 (1912). Therefore, defendants say it is pure speculation whether Beecks' claim against the real manufacturer is barred. Since Beecks failed to allege that they tried to sue the true manufacturer and lost because of the statute of limitations, defendants say Beecks failed to state a claim for damages against them for any type of misrepresentation.

Cases in which a plaintiff claims a defendant caused him to lose an otherwise valid cause of action because of the running of statutes of limitation often involve claims against attorneys for malpractice. Annot., 90A.L.R.3d 293 (1979). To hold the attorney liable, a plaintiff must prove that he would have been successful in the underlying suit and that his claim was lost through the attorney's negligence. Baker v. Beal, 225 N.W.2d 106, 109 (Iowa 1975). Where the attorney negligently allowed the statute of limitations to run, there is no requirement that the plaintiff try to prosecute the underlying suit before attempting to hold the attorney liable. Drury v. Butler, 171 Mass. 171, 175, 50 N.E. 527, 528-29 (1898); Fuschetti v. Bierman, 128 N.J.Super. 290, 295, 319 A.2d 781, 784 (Law Div. 1974); King v. Jones, 258 Or. 468, 473, 483 P.2d 815, 818 (1971) (possibility of waiver of defense of statute of limitations "is too speculative and unrealistic for serious consideration").

Beecks' claim is that defendants' misrepresentations caused them to lose their valid cause of action. They will have to prove that defendants made misrepresentations and, as in a malpractice action against an attorney, that Beecks would have been successful on the underlying cause of action. Where a plaintiff alleges that a defendant's misrepresentations caused the loss of a valid cause of action, we will not require the plaintiff to bring the original action and lose before recognizing a damage claim for the misrepresentation. Beecks alleged that the statute of limitations has run against the true manufacturer. This generated an issue of whether their original claim is, in fact, barred by the statute of limitations. The trial court erred, therefore, in concluding as a matter of law in summary judgment that Beecks could not prove that they lost their original cause of action. Plaintiffs should be given an opportunity to present their evidence on this damage issue to a trier of fact.

We turn now to consideration of the legal theory, if any, upon which Beecks may base their claim.

III. Fraudulent misrepresentation. In their petition, Beecks alleged that defendants recklessly misrepresented to them in the federal court action that Aquaslide manufactured the slide and therefore the misrepresentation amounted to fraud. Our state trial court agreed with defendants' contention that no genuine issue of fact existed whether defendants knew that the investigation had been insufficient. The court relied on affidavits from Hartford's employees, the lawyer Hartford hired for Aquaslide, and Meyer's sworn testimony stating that they did not know the investigation was insufficient. We conclude that Beecks have generated a genuine issue of fact on whether Aquaslide, through its president, Carl Meyer, was reckless in making a misrepresentation that amounted...