Cedar Falls Bldg. Center, Inc. v. Vietor, 83-1173

• Decision Date: 29 January 1985
• Docket Number: No. 83-1173,83-1173
• Citation: 365 N.W.2d 635
• Parties: CEDAR FALLS BUILDING CENTER, INC., an Iowa Corporation; Gene Bond Plumbing & Heating Co., an Iowa Corporation, Plaintiffs, v. Dana B. & Nola G. VIETOR, Defendants-Appellees, v. YOUNG PLUMBING & HEATING CO.; Wickes Lumber Division of the Wicks Corporation and Dennis Damm, d/b/a Hawkeye Builders, Interpleader Plaintiffs, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION, Interpleader Defendant-Appellant.
• Court: Iowa Court of Appeals

Page 635

365 N.W.2d 635

CEDAR FALLS BUILDING CENTER, INC., an Iowa Corporation; Gene Bond Plumbing & Heating Co., an Iowa Corporation, Plaintiffs, v. Dana B. & Nola G. VIETOR, Defendants-Appellees, v. YOUNG PLUMBING & HEATING CO.; Wickes Lumber Division of the Wicks Corporation and Dennis Damm, d/b/a Hawkeye Builders, Interpleader Plaintiffs, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION, Interpleader Defendant-Appellant.

No. 83-1173.

Court of Appeals of Iowa.

Jan. 29, 1985.

Michael M. Pedersen of Martin, Nutting, Miller, Keith & Pedersen, Waterloo, for interpleader defendant-appellant.

Douglas V. Coonrad, Hudson, for defendants-appellees.

Heard by OXBERGER, C.J., and SNELL, and SCHLEGEL, JJ.

OXBERGER, Chief Judge.

The appellant bank has appealed from a verdict in favor of the defendant-appellees in their cross-claim against the bank for negligent misrepresentation. We affirm in part and reverse in part.

Hawkeye Builders, a homebuilding concern owned and operated by Dennis Damm, contracted to build a house for purchasers Dana and Nola Vietor. The Vietors obtained financing for the project from First Federal Savings and Loan Association of Waterloo.

During construction it developed that Hawkeye Builders had not paid some of its subcontractors and suppliers. The Vietors learned of these problems and contacted their loan officer at First Federal. The loan officer allegedly assured the Vietors that all supplies and subcontractors had filed "lien waivers" with the bank, waiving their rights to place liens on the real estate and thus protecting the Vietors from liability for bills left unpaid by Hawkeye. The Vietors then proceeded to disburse to Hawkeye the remaining amounts of the $68,000 contract price and the Vietors allege that in so doing they relied on the loan officer's assurances that "lien waivers" had been filed.

After the Vietors had paid Hawkeye, several suppliers and subcontractors of Hawkeye filed mechanic's liens against the property. Contrary to the Vietors' belief, these suppliers and subcontractors had not filed "lien waivers" at the offices of First Federal.

In the complicated litigation resulting from the mechanic's liens, the Vietors filed a cross-claim against First Federal alleging the tort of negligent misrepresentation. The Vietors alleged that First Federal had negligently misrepresented that all of Hawkeye's suppliers and subcontractors had filed lien waivers.

This cross-claim was tried to a jury, which awarded the Vietors damages of over $34,000. First Federal has appealed from judgment upon the verdict. None of the other parties or other claims in the underlying mechanics' lien litigation are involved in this appeal.

First Federal says there are several errors on appeal. The bank initially contends there was insufficient proof of justifiable reliance. Prior to any representations by the bank, it claims the Vietors knew that the mechanic's liens might be filed and that Damm was not paying some of the subcontractors. Second, the bank says the court erred in not allowing it to amend its petition at the close of evidence to conform to proof of contributory negligence by the Vietors. An instruction to the jury regarding contributory negligence was also improperly refused, the bank says. Third, the issue of punitive damages should not have been submitted to the jury, First Federal says, alleging there was no evidence of wanton, reckless, or grossly negligent conduct on the part of the bank.

The scope of our review of these alleged errors is limited to correcting errors of law. Iowa R.App.P. 4. The findings of fact of the jury are binding on us if supported by substantial evidence. Iowa R.App.P. 14(f)(1). We must view the evidence in the light most favorable to the one in whose favor the verdict was rendered. Poulsen v. Russell, 300 N.W.2d 289, 294 (Iowa 1981). It is for the jury to act as trier of facts, and the court cannot substitute its view of the evidence for that of the jury. Neighbors v. Iowa Electric Light and Power Co., 175 N.W.2d 97, 101 (Iowa 1970); Sieren v. Stoutner, 162 N.W.2d 396, 397 (Iowa 1968).

I.

Vietor says that in 1981 while the house was being built, he became concerned about signing any more vouchers to pay Damm until he was certain Damm was paying the subcontractors. He expressed this concern to the assistant vice president of the bank, Geoffrey Kennedy, and said Kennedy replied, "That's what we have lien waivers for." The bank argues this statement was not made, but says it should not have been taken by Vietor to mean the bank had obtained lien waivers for him.

The bank claims there is ample evidence that the Vietors could not have justifiably relied upon its statements regarding lien waivers because the Vietors were aware that the liens might be filed. It says this evidence includes the fact that Dana Vietor was told by a subcontractor he would not work for Damm because Damm had trouble paying his subcontractors. Several subcontractors had contacted Vietor telling him they were not being paid. Prior to a conversation with the bank, Vietor was told by several subcontractors they were not being paid and before an August meeting, was told that one-half of one subcontractor's bill was paid.

Vietor says the entire June conversation about payment of the subcontractors included the statement from Kennedy, "I'll take care of it. Don't worry about it." Vietor asked why he should not worry about it, and Kennedy reportedly responded, "That's what we have lien waivers for." The statement was repeated in a phone call later and in another conversation in August. A subcontractor who was present during one of these conversations confirms the substance of the statements, and said it was his impression Kennedy was reassuring Vietor that the bank had obtained lien waivers for him. The bank had also been presented with a copy of the contract between Vietor and Damm which stated that last payment would not be made until there were assurances the subcontractors had been paid. The Vietors further had been relying on the bank to make the payouts after Vietor signed the vouchers.

Kennedy said he did not know that Damm had any trouble in the past paying his bills, and knew Damm only as a reliable contractor after one and one-half years of business, building four houses in that time. He said if he had known Damm was having financial problems, he would have obtained lien waivers from Damm as the project progressed. Instead, he viewed this as a problem between Vietor and Damm. Kennedy indicated he viewed his primary responsibility to the bank, and to see that its mortgage received priority over any liens that might be filed. However, Craig Holdiman, the property manager for First Federal, testified that at the time the Vietors received their loan from the bank, it was the policy of the bank to receive waivers as the loan proceeds were disbursed. He could not explain why such waivers were not obtained in this instance.

We believe the plaintiffs generated a jury question on the issue of justifiable reliance, and the jury's finding that the Vietors were justified in their reliance is supported by substantial evidence. The jury could find the bank's statements were made in circumstances to justify the Vietors' belief the problem would be taken care of, even though he was aware that certain subcontractors were not being paid. The representations to him were made several times. When an individual acts on the representations of another and relies on them in good faith, he has no duty to further investigate, or in this case, to ask to see the waivers. See Riley v. Bell, 120 Iowa 618, 626, 95 N.W. 170, 172 (1903).

II.

A grant to amend a petition should be freely given when justice so requires. Iowa R.Civ.P. 88. It is within the court's sound discretion whether an amendment to conform to proof should be allowed, and the court's decision will be reversed only if there is clear abuse of that discretion. Freeman v. Bonnes Trucking, Inc., 337...