Jensen v. Sattler, 03-1251.

• Decision Date: 29 April 2005
• Docket Number: No. 03-1251.,03-1251.
• Parties: Craig J. JENSEN, Appellant, v. James A. SATTLER and Julie M. Sattler, Appellees.
• Court: Iowa Supreme Court

696 N.W.2d 582

Craig J. JENSEN, Appellant, v. James A. SATTLER and Julie M. Sattler, Appellees.

No. 03-1251.

Supreme Court of Iowa.

April 29, 2005.

Rehearing Denied June 1, 2005.

Stephen J. Holtman, Leonard T. Strand, and Jason M. Steffens of Simmons, Perrine, Albright & Ellwood, P.L.C., Cedar Rapids, for appellant.

Sean W. McPartland of Lynch Dallas, P.C., Cedar Rapids, for appellees.

STREIT, Justice.

Three years after a Cedar Rapids couple sold a man their mansion with its "touch of Beverly Hills," it turned into a money pit. The buyer sued the couple for misrepresentation and a violation of Iowa's Real Estate Disclosure Act. The district court ruled he had to prove fraud to recover and consolidated his claims. The court also dismissed one of the sellers from the suit because she did not sign a disclosure form. The buyer lost what remained of his case, which was tried to a jury. We reverse in part and remand for a trial on the claims the court prematurely dismissed.

I. Facts and Prior Proceedings

In December 1997, James and Julie Sattler sold their home to Craig Jensen for $660,000. The Sattlers had lived in the home since 1993. James Sattler owned Jim Sattler Construction Company, Inc., which built the house in 1992.

When James Sattler first showed Jensen the house, he handed Jensen a brochure that attested to the high quality of Sattler homes. The brochure characterized Sattler as a "hands-on" supervisor who was "on the job-site all the time." The house was featured in the local Parade of Homes and touted as "an elegant `touch of Beverly Hills' right here in Cedar Rapids!" It is a large executive home with over 8000 square feet of living space.

Prior to closing, the Sattlers gave Jensen a real estate disclosure form. See Iowa Code § 558A.2 (1997) (requiring transferors of real estate to provide buyers a written disclosure statement). James Sattler signed the form but Julie Sattler did not. Two problems were disclosed: (1) a crack in the front wall that caused water to leak into the basement "ONE TIME ONLY!" and (2) a faulty master shower valve. Neither problem dissuaded Jensen from buying the home. Jensen moved in and for three years did not have any problems, except for an intermittent inability to adequately cool the upper level of the house. In 2001, Jensen claimed he discovered problems with (1) the roof and attic, (2) electrical wiring in the foyer, and (3) improper drainage around the foundation. Trouble began on New Year's Day when Jensen found water streaming down the interior walls of the home. Inadequate attic ventilation had caused large ice dams to form on the roof. Water backed up behind the dams and seeped through the roof into the attic and down the inside of the house. Extensive damage resulted.

While repairing the water damage, Jensen found an electrical problem in the foyer. Jensen discovered sixty light bulb sockets in the foyer lighting were empty. Workers filled all the sockets with bulbs, but the electrical wiring proved insufficient, overloaded, and melted.

Lastly, Jensen had problems with the crack in the basement which the Sattlers had disclosed. The crack widened and water seeped into the basement. Jensen excavated around the crack and found the drainage tile around the foundation was clogged with dirt. The tile was only three inches in diameter and not surrounded by gravel. Jensen also claimed dirt was backfilled too high around the house.

Jensen sued the Sattlers on a common law and a statutory basis. Jensen's pleadings show three distinct common law claims: fraudulent misrepresentation, fraudulent nondisclosure, and negligent misrepresentation. Jensen also argued the Sattlers failed to disclose defects pursuant to Iowa Code chapter 558A.

The Sattlers filed a motion for summary judgment. The district court granted most of the motion. First, the district court dismissed all claims against Julie Sattler because she did not (1) make any affirmative representations to Jensen about the house or (2) sign the disclosure statement. Second, the district court dismissed Jensen's claims "as to any negligent misrepresentation claim against [James Sattler]" but overruled the motion "as to any claim of fraudulent misrepresentation or Chapter 558A violation by [James Sattler]." The court held "proof of the violation of the standards set out in Chapter 558A" was required to recover and later gave the jury an instruction that blended the common law and statutory claims into one common law claim of fraudulent nondisclosure.¹ The jury found in favor of Sattler. Jensen appealed.

II. Motion on Appeal

Before reaching the merits of the appeal, we must rule upon one outstanding motion. This past June, the Sattlers filed a notice of additional authority. See Iowa R.App. P. 6.21. In their notice, the Sattlers directed our attention to a new case and discussed how it supported their arguments on appeal.

Jensen moved to strike the argumentative portions of the Sattlers' notice of additional authority. Jensen claimed a party may not use such a notice to interject additional written argument into an appeal. We grant Jensen's motion to strike.

III. The Merits

Jensen claims the district court erred when it (1) held proof of fraud was required for a buyer to recover under the Iowa Real Estate Disclosure Act; (2) consolidated Jensen's common law and statutory claims; (3) granted summary judgment in favor of Julie Sattler; and (4) erroneously excluded certain evidence from trial. The first three issues in this case involve issues of statutory interpretation, and therefore our standard of review is for errors at law. In re Detention of Willis, 691 N.W.2d 726, 728 (Iowa 2005). We review the evidentiary claims for an abuse of discretion. In re Detention of Palmer, 691 N.W.2d 413, 416 (Iowa 2005).

A. Does Iowa Code Section 558A.6(1) Require Proof of Fraud?

Iowa Code chapter 558A is Iowa's Real Estate Disclosure Act. It requires persons interested in transferring real estate to deliver a written disclosure statement to prospective buyers. Iowa Code § 558A.2. The disclosure statement must include certain information about the "condition and important characteristics and structures on the property" as provided in rules adopted by the real estate commission. Id. § 558A.4(1); see, e.g., Iowa Admin. Code r. 193E-14.1(6) (setting forth sample disclosure statement). A person who violates the Act's disclosure requirement is ordinarily liable for the amount of actual damage the buyer suffers. Id. § 558A.6. That said, the Act states

[t]he transferor ... shall not be liable for [any] error, inaccuracy, or omission in information required in a disclosure statement, unless that person has actual knowledge of the inaccuracy, or fails to exercise ordinary care in obtaining the information.

Id. § 558A.6(1) (emphasis added).

Jensen argues the plain language of the above-italicized portion of the statute permits a buyer to recover upon a showing the transferor did not exercise ordinary care in obtaining the information required to be disclosed. He contends this standard is something less than fraud. The Sattlers maintain Jensen did not preserve error. In the alternative, they claim the district court correctly interpreted the statute.

1. Error Preservation

We find no merit in the Sattlers' error preservation claim. Jensen alleged a violation of the statute in his petition. The Sattlers filed a motion for summary judgment and a reply brief in which they repeatedly insisted Jensen had to prove fraud to recover under the statute. It is true the summary judgment record is not a model of clarity. Jensen generally resisted summary judgment, however, and in hindsight it is plain the district court's ruling barred Jensen from introducing evidence to show the Sattlers did not exercise ordinary care in obtaining the information to disclose on the form. Jensen preserved error. See State v. Miller, 229 N.W.2d 762, 768 (Iowa 1975)

(if a trial court's ruling is dispositive on the issue of admissibility, it is considered final for purposes of appeal and no further objection is necessary).

That Jensen preserved error is apparent from other pretrial filings. The Sattlers filed a motion in limine in which they contended the statute required a showing of fraud. They argued "[v]erbal references to a negligence standard would be highly prejudicial, misleading, and confusing to the jury" and requested Jensen, his counsel, and the plaintiff's witnesses be "admonished" not to make any such statements.² In a contemporaneously filed pretrial statement Jensen argued the Sattlers

can be liable for failure to make accurate disclosures not only for actual knowledge that the conditions exist but also for failing to "exercise ordinary care in obtaining the information." 558A.6(1).

The district court granted the Sattlers' motion and forbade Jensen from arguing a negligence standard at trial. Error was clearly preserved. See Miller, 229 N.W.2d at 768

; see also State v. Wells, 629 N.W.2d 346, 355 (Iowa 2001) (pointing out our concern is what the ruling of the trial court does or purports to do, not the title of the motion or the prayer). Jensen was not required to file a posttrial motion to preserve error as the Sattlers suggest. See Miller, 229 N.W.2d at 768; see also Explore Info. Servs. v. Iowa Ct. Info. Sys., 636 N.W.2d 50, 57 (Iowa 2001) (holding "it is necessary to preserve error [with a rule 1.904(2)] motion only when the district court fails to resolve an issue ... properly submitted for adjudication" (emphasis in original)).

2. Exercising Ordinary Care in Obtaining the Information

Jensen argues the plain language of Iowa Code section 558A.6(1) permits a buyer of real estate to recover for damages even if the buyer is unable to prove fraud or that the seller had actual knowledge of the error, inaccuracy, or omission in the disclosure form. Jensen points to the "exercise ordinary care in obtaining the information" language in...