Ezzone v. Riccardi

• Decision Date: 21 September 1994
• Docket Number: No. 93-855,93-855
• Citation: 525 N.W.2d 388
• Parties: M. Harold EZZONE, Appellant, Patricia L. LaRosa, Intervenor-Appellant, v. Ronald RICCARDI a/k/a "Rick" Riccardi, Willis M. Hansen, Dennis B. Hansen, Precision of New Hampton, Inc., and State Bank of Lawler, Appellees. Patricia LaROSA, Appellant, v. Ronald RICCARDI a/k/a "Rick" Riccardi, Willis M. Hansen, Dennis B. Hansen, Precision of New Hampton, Inc., and State Bank of Lawler, Appellees.
• Court: Iowa Supreme Court

Page 388

525 N.W.2d 388

M. Harold EZZONE, Appellant, Patricia L. LaRosa, Intervenor-Appellant, v. Ronald RICCARDI a/k/a "Rick" Riccardi, Willis M. Hansen, Dennis B. Hansen, Precision of New Hampton, Inc., and State Bank of Lawler, Appellees.

Patricia LaROSA, Appellant, v. Ronald RICCARDI a/k/a "Rick" Riccardi, Willis M. Hansen, Dennis B. Hansen, Precision of New Hampton, Inc., and State Bank of Lawler, Appellees.

No. 93-855.

Supreme Court of Iowa.

Sept. 21, 1994.

Order Denying Rehearing and

Amending Opinion Dec. 15, 1994.

Mark S. Soldat, Algona, and Mary Jane White, Waukon, for appellant M. Harold Ezzone.

Donald G. Thompson, Melissa Weets Anderson, and David E. Mullin of Bradley & Riley, P.C., Cedar Rapids, for appellant Patricia L. LaRosa.

Andrew F. Van Der Maaten of Anderson, Wilmarth & Van Der Maaten, Decorah, and Mark McCormick and Margaret C. Callahan of Belin Harris Lamson McCormick, P.C., Des Moines, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, LAVORATO, NEUMAN, and TERNUS, JJ.

HARRIS, Justice.

Appeals are routinely controlled by our scope of review. This case, involving a surprising jury verdict, is a classic example. Plaintiffs, formerly husband and wife, recovered substantial verdicts following a disastrous manufacturing venture. Defendants, who consider themselves to be innocent financial backers, are convinced plaintiffs' financial wounds were either self-inflicted or caused by the employee they themselves selected. This employee, a defendant who did not attend trial, is severely chastised by all parties for his duplicity in the events leading to this dispute. The present suit ¹ is largely a contest to determine who should bear the burden of loss for his misdeeds. Defendants' view, even though supported by considerable evidence, was rejected by the jury.

The jury subscribed to plaintiffs' factual contentions, contentions that clearly would have been rejected by many fact finders. Because we cannot say there is no substantial evidence supporting plaintiffs' claims, and because the case was submitted on instructions without objections by defendants' trial counsel, we affirm the findings of liability and compensatory damages. In accordance with a rule now mandated by the United States Supreme Court, we review and reduce the punitive damage awards.

Harold Ezzone and his wife Patricia LaRosa, the plaintiffs, equally owned and operated an automotive parts remanufacturing business called Precision Torque Converters of Florida, Inc. (PTCF). Ezzone founded the company based on his self-acquired knowledge of torque converter repair and his perceived demand for those services. Ezzone was gifted mechanically, but his speech impairment and cystic fibrosis are said to have hindered PTCF's expansion.

In 1983 the plaintiffs met defendant Ronald "Rick" Riccardi. Riccardi encouraged the plaintiffs to expand the business and soon thereafter assumed control of financial affairs of the company. Under his direction the business expanded, ultimately employing fifty people and operating three shifts. By now Riccardi had taken over all facets of the business and was commanding sizable compensation. Riccardi did not, however, become an owner, director, or officer, and was never given authority to sign checks.

In 1985 Riccardi and Ezzone began exploring the possibility of opening a new factory in the west or north. Defendants point out that this was because the Florida operation was floundering. Although not readily apparent at this time, the business mortgage payments from PTCF were delinquent, and the mortgage was later foreclosed. The plaintiffs provided a signed personal financial statement showing net worth of $1,479,463, but their business bank account showed an overdraft balance of $57,181. An independent audit showed a pretax income from the company of $290,000. Defendants now assert the company actually lost $8000 that year.

During 1985 Riccardi communicated with the Iowa development commission and later decided to locate in New Hampton. Because Riccardi was slow to provide detailed information, the commission delayed acting in the matter. In January of 1986, Riccardi met with New Hampton officials, including banker Robert Rigler, to whom Riccardi provided financial information. A three-bank consortium, including Rigler's, and defendant Willis Hansen's bank, State Bank of Lawler (cumulatively "Hansen defendants" and including defendants Dennis Hansen and Precision of New Hampton, Inc.), was to provide financial incentives if the information that had been provided proved to be accurate.

Rigler ultimately withdrew from the arrangement. He discerned problems with the financial information, and feared the New Hampton community would ultimately suffer from the venture. After Rigler withdrew, Willis visited the PTCF factory in Florida. He met with the plaintiffs and became encouraged to help them in Iowa. Willis and the defendant Bank of Lawler ultimately provided a $300,000 loan commitment to start the Iowa operation. The plaintiffs did not contribute any personal assets to the start-up, but all remaining inventory and equipment of PTCF was transferred to the Iowa factory.

Precision Torque Converters of Iowa (PTCI) was incorporated, and shares were equally distributed to LaRosa and Ezzone. All actions of the corporation required the consent of both parties. LaRosa was to return to Florida and manage PTCF, while Ezzone remained in Iowa to operate PTCI.

Upon LaRosa's return to Florida, she was beset with major financial difficulties at the company. The plaintiffs now blame this collapse on Riccardi. At the time, though, Riccardi ascribed the problems to LaRosa and convinced Ezzone to also blame her for them. PTCF was ultimately abandoned and LaRosa briefly came to Iowa. Riccardi and Ezzone promptly left on a business trip to Taiwan, leaving LaRosa alone in Iowa.

LaRosa then had to return to Florida because of arrest warrants issued for her after she signed several insufficient funds checks for PTCF. Riccardi told Ezzone that LaRosa had been unfaithful to him while in Florida. According to the plaintiffs, Riccardi then convinced Ezzone to begin hiding assets of the company and switching ownership status.

Ezzone filed for divorce in Florida and started divesting LaRosa of marital property. In this quest, Ezzone asked his attorney, Michael Kennedy, to remove LaRosa as a PTCI shareholder. Kennedy agreed to do so but did not follow through. All of these actions were said to be under the influence of Riccardi.

While Riccardi and Willis were vacationing in Florida, the PTCI factory burned to the ground. Insurance proceeds of $950,834 were paid into accounts at the bank. Although the ultimate destination of these moneys is in dispute, the factory was rebuilt.

Willis and defendant Dennis Hansen finally purchased PTCI for $250,000. The company was reincorporated as Precision of New Hampton, Inc. and, as mentioned, is one of the defendants in this suit. Although plaintiffs were not present at the closing, the Hansens accepted Riccardi's authority to transfer the property and paid the purchase price to him. Riccardi never transferred these moneys to the plaintiffs.

Ezzone initially brought suit against Riccardi, seeking an accounting. After further investigation, Ezzone added the Hansens and the bank as defendants. LaRosa later intervened.

The case was submitted on special verdicts. The jury found that Ezzone and LaRosa each owned fifty percent of PTCI and were entitled to recover on various claims we shall discuss. Damages were awarded against the defendants as follows:

1. $200,000 each to Ezzone and LaRosa against all defendants on interference with contract claims (the parties agreed that this claim is duplicative of item 3, the confidential relationship claim);

2. $125,000 each to Ezzone and LaRosa against Riccardi for his conversion of ownership (all defendants were found to have acted in concert with Riccardi) (the parties agreed that this claim is duplicative of item 3, the confidential relationship claim);

3. $325,000 for Ezzone and $350,000 for LaRosa against Riccardi for breached confidential relationship (all defendants were found to have acted in concert with Riccardi) (all parties agreed that this claim was duplicative of the conversion and interference damages, so judgment was only entered on this jury award);

4. $180,000 for Ezzone in punitive damages against Willis Hansen 5. $25,672 for Ezzone in punitive damages against Dennis Hansen;

6. $180,000 for Ezzone in punitive damages against the State Bank of Lawler;

7. $450,000 for LaRosa in punitive damages against Willis Hansen;

8. $59,900 for LaRosa in punitive damages against Dennis Hansen;

9. $365,000 for LaRosa in punitive damages against the State Bank of Lawler.

Ezzone and LaRosa appeal from certain findings, and the Hansen defendants cross-appeal. As mentioned, Riccardi did not appear at trial; he is not involved in this appeal.

The action was tried to a jury at law, so our review is on error. Iowa R.App.P. 4. In considering the sufficiency of the evidence of a defendant's negligence, we view the evidence in the light most favorable to the plaintiff. Miller v. Young, 168 N.W.2d 45, 50-51 (Iowa 1969). It would be unduly cumbersome to consider the contentions in the sequence presented in the briefs, so we address them in the order we deem of controlling importance. Divisions I through X relate to issues the Hansen defendants raise in their cross-appeal. Divisions XI through XIV relate to issues raised by plaintiffs in their appeals. Other divisions relate to issues that will be explained.

I. The Hansen defendants challenge the jury's verdicts on plaintiffs' intentional interference claim on four grounds. They first assert there was insufficient evidence to support submission of the claim to the jury. It was submitted on the theory that the shares Ezzone and LaRosa held in PTCI constituted contracts and that defen...